Theme 1 Flashcards
(122 cards)
1
Q
Benefit of Mass Market
A
produce a product that appeals to a range of demographics -) for example, appeals to high and low income -) increase sales volume -) linked to economies of scale
2
Q
drawback of mass market
A
Less specialised in meeting the needs of a specific demographic -) reduce knowledge of specific customers -) product less likely to satisfy customer needs -) more price elastic
3
Q
benefit Niche market
A
can develop a specialist understanding of the target demographic -) for example, what bird watches likely do on holiday -) can more effectively meet their needs -)
create a holiday that is tailored to them this is more effective than mass market that supply generic holidays
4
Q
Drawback niche market
A
focused on the specific needs of a specific segment -) for example, halal food -) suitable, only for babies and people who eat halal food -) limiting potential sales therefore could not benefit from purchasing economies of scale
5
Q
Benefit of online retailing
A
online detailing baby beneficial as the product will be available to customers from anywhere in the world without leaving their home -) This increases accessibility for customers -) combined with the rising popularity of purchasing online -) this could lead to increased sales volume -) link to economies of scale
6
Q
drawback of online retailing
A
Online retailing may not be beneficial as customers can easily find alternatives online -) They can easily compare prices of products -) make the ball sensitive to changes in price -) this makes the product more price elastic as their substitutes.
7
Q
benefit of dynamic market
A
Dynamic markets are fast changing -) meaning new consumer trends appear quickly -) If the business is able to adapt to trends quickly they may be able to differentiate from competitors -) By gaining a first move advantage.
8
Q
drawback of dynamic markets
A
Dynamic markets change rapidly -) products, and services. Need to change to keep up with trends in the market -) requires high investment into R&D -) example paying high wages of scientist and engineers -) liquidity
9
Q
Benefit of product orientation
A
product orientation involves focusing on developing the product therefore lots of investment into R&D of the function of the product -) this improves innovation by having unique features -) This means they are differentiated focused according to porters generic strategy -) custom is willing to pay higher prices without a significant fall in demand, making the product more price inelastic
10
Q
Drawback of product orientation
A
product orientation can be expensive as there’s lots of investment into R&D in order to innovate -) increases fixed cost -) for example, paying high wages to scientist and engineers.
11
Q
benefit of market orientation
A
Market orientation involves focusing on customer wants needs -) This allows the business to create products based on consumer trends -) market research to quantify demand -) allowing them to produce products which are likely to have high sales volume -) link to EOS
12
Q
Drawback of market orientation
A
Market research is needed to find out customer wants and needs -) high amount of investment needed into market research -) ET question as a focus groups using a large sample size -) in order to find out customer wants + needs -) increase wages for specialist researches
13
Q
benefit of primary research
A
Primary market research involves collecting data which is up-to-date at specific to the business -) For example questionaires and focus groups -) this allows the business to effectively identify customer wants and needs -) creating a product which effectively meets customer needs -) link to PED.
14
Q
Drawback of primary research
A
primary research can be expensive -) as specialist researchers needed to conduct research -) For example questionaires and focus groups using a large sample size in order to find out customer wants and needs -) leads to increase cash outflows of wages -) link to liquidity
15
Q
Benefit of secondary research
A
The research is presented a report form -) for example has been already completed -) therefore does not require researchers to be recruited as there will not be a requirement to do focus groups -) This will significantly reduce wages and therefore outflows -) linked to liquidity.
16
Q
drawback of secondary research
A
The research has been completed in the past for a different purpose -) therefore may not be time or business relevant -) therefore making invalid suggestions and how the business can improve -) leading to inappropriate product portfolio -) Therefore not meeting customer wants and needs -) lower sales volume -) cannot benefit from purchasing economies of scale.
17
Q
Benefit of quantitative data
A
Data collected in statistical form using close questions -) These can be completed independently -) and easily analysed -) therefore specialist researchers unlikley to be needed -) reducing the cost of wages for conducting the research -) link to liquidity.
18
Q
Drawback of quantitative data
A
The data is presented in statistical form -) resulting in limited depth -) Respondents can not explain why they made such choices -) making it difficult to develop new ideas -) limiting innovation.
19
Q
benefit of qualitative data
A
Invites the participant to give a more detailed response -) can lead to a deeper understanding of custom needs -) resulting in the business being able to produce a product that will effectively meet their needs -) increasing customer loyalty -) link to PED
20
Q
drawback of qualitative data
A
Gathering a large volume of detailed responses will require a significant number of researchers -) significantly increased fixed cost -) lower volume of data is collected as business may not have cash to pay researchers -) resulting in unreliable results as less people are asked -) resulting in the rug product being produced a wrong price being charged -) low sales volume -) benefit from PEOS
21
Q
Benefit of market segmentation
A
through segmentation of business, target market research at a specific group -) rather than trying to create a product for all customers -) this can help business understand customer needs more effectively -) meaning they can adapt the design mix to better meet their needs -) link to PED
22
Q
Drawback of market segmentation
A
need to create multiple products to meet the needs of different segments -) for example, using geographical segmentation to create different products for customers in different countries—) therefore unable to benefit from the economies of scale.
23
Q
what factors lead to a change in supply?
A
changes in the cost of production, for example, raw materials, legislation and wages
introduction of technology
Indirect taxes
Government subsidies (money given to cover sub cost of production)
24
Q
Benefit of reduced cost of production
A
reduce cost of production -) increases, profit margins -) increased incentive to supply -) increased in supply of… -) rightward shift in supply
25
drawback of external factors on supply
external factors prevents business from supplying -) reduced abilities to supply -) fall in supply of… -) leftwards shift in supply
26
Price elastic
due to poor customer, service products may become price elastic -) leading to customers being less loyal to the brand -) therefore, if price increases that will be a significant fall in demand -) leading to pressure to keep prices low -) leading to lower revenue, decreased gross profit margin
27
Price inelastic
through R&D -) this would differentiate their products from rivals according to porters generic strategy such as -) customers likely to stay loyal as they know they can’t get the same products from competitors making the product price inelastic -) increased revenue and increased profit margins
28
luxury goods
Business is vulnerable to changes in average income -) if Betty people lose their job that will be a fault in income -) this will lead to a significant fall into bad business goods as the consumer switch to cheaper alternatives -) leading to fall in revenue and fall gross profit margin
29
Normal goods
Business that sells normal goods is likely to have stable predictable sales -) this is because when income changes the demand does not change very much -) therefore would likely to see a significant fall or rise in profits when income changes -) there unlikely to make a loss and therefore keep up with loan repayments -) could result in getting low interest rates on loans leading to low expenses -) the business is attractive to banks as it is a safe investment
30
inferior goods
When unemployment is high then incomes will be lower therefore the demand of inferior goods will increase -) The business may then need to be flexible to be able to respond to an unexpected change in income so they can increase production of a good to meet the new demand -) this will lead to increase in gross profit -) this flexibility will also help them reduce production when incomes rise again -) This will help ensure that they can reduce operating expenses when demand falls therefore avoiding a loss.
31
Benefit of market map
Market map helps businesses identify gaps in the market -) business can then conduct RandD -) design a product that matches characteristics of… -) product likely to be unique and differentiated according to porters generic strategy -) Link to PED
32
Drawback of market map
Market map based on consumer opinions -) to ensure decisions based on opinions are valid -) business needs to collect data from a large sample size -) requires large number of researchers -) to collect and analyze data and display it in market map -) if business recruits researchers it will significantly increase wages -) Link to liquidity
33
Importance of Deaign Mix aesthetics/function
If business improves aesthetics/ function of products design mix -) through R&D into improved functionality or MR to identify consumer trends -) product is likely to become differentiated according to Porter compared to rivals -) Link to Porter and PED
34
Drawback of Design Mix aesthetics/function
Significant investment into R&D or MR -) Link to cost & profit or liquidity
35
Importance of design mix /economic manufacturing
If a business designs a product with economic manufacture as priority -) eg using less robust raw materials -) this reduces their cos -) can pursue cost leadership according to Porter
36
Drawback of prioritising economic manufacturing
If a business designs a product with economic manufacture as priority—) eg using less robust raw materials —) it may mean that the product they design becomes less robust -) damaging the businesses reputation -) customers switch to alternatives
37
Changes in DM to reflect social change
Changing design mix to reflect social trends ( choose social trend and design mix relevant to Q) -) product now aligned with social trends -) better meets customer needs -) customers more loyal to business -) Link to PED
38
Drawback of Changes in DM to reflect social change
Identify relevant social trend -) significant investment into MR -) ensures data is valid therefore must be collected from a large sample size -) increased wages as business needs to recruit specialist researchers to collect and interpret data
39
Resource depletion benefit
Business may have to stop using rate wood when making a product -) have to swap to more sustainable wood -) changing aesthetic of product due to concern over resource depletion -) aligning with consumer values -) better meeting consumer needs
40
Resource depletion drawback
Adapting design over resource depletion -) meaning business has to find alternatives suppliers for raw materials -) they may charge higher prices for new materials -) Link to profit or cash
41
Above the line benefit
Above the line promotion, such as TV advertising is most effective for large businesses -) as it’s accessible to an appeals to a wider audience across multiple market segments such as multiple geographical regions -) meaning that it is likely to generate a higher volume of sales.
42
Above the line drawback
Above the line promotion, such as TV advertising -) requires a significant amount of cash as the TV companies require payment upfront -) reduced net, cash flow leading to lower cash reserves -) Link to liquidity.
43
Ways to build a brand - through USP language NOT product
Effective use of language, for example, using language which implies that the product is superior to competitors, make the product price inelastic
44
Ways to build a brand - advertising
Effective communication with customers improves brand awareness in increasing sales link to economies of scale
45
Ways to build a brand - sponsorship
Building an association with the event or organisation, which portrays a shared image -) can give a positive brand image, making them differentiated from other products who do not have that image according to porter as they are re differentiated focus -) link to price inelastic
46
Changes in branding and promotion to reflect social trends
Grow in the use of online -) increased audience online each year -) communicate to them through social media influences who are currently popular -) brand associated with the popular influencer -) increased sales -) linked to economies of scale
47
Emotional branding
Appeal to someone’s emotions -) e.g. empathy for the animals -) by communicating how ethical the company is -) it makes them differentiated according to porter -) link to price inelasticity
48
Price skimming benefit
Temporary high price for a price inelastic good at the start of the product life -) that will be paid by the early adopters -) very high sales revenue per item sold -) increased gross profit
49
Drawback of price skimming
High price -) lower demand, particularly in a price elastic market -) lower volume -) can benefit from purchasing economies of scale or fix cost of R&D associated with the advanced product will be spread over less units
50
Penetration pricing benefit
Low price at the start of the products life -) significant increase in demand, especially in a price elastic market -) as in a price elastic market the percentage change in demand will be greater than the change in price -) this will lead to increase volume sold -) benefit from purchasing economies of scale
51
Penetration pricing drawback
Price might be lower than the cost of sales -) potential loss on each product sold -) gross loss -) operating loss, causing the business to pay for expenses with cash reserves -) link to liquidity
52
Cost plus pricing benefit
Markup added to the cost of production for each product -) prices are flexible when costs change -) price will increase cost of production increase in order to maintain profit margins -) This will lead to the business, ensuring they don’t make a loss on their product sold -) unlikely to experience an operating loss -) link to liquidity
53
Cost plus pricing drawback
However, cost plus pricing does not consider external factors -) e.g. in a very elastic market competitor could reduce their markup -) in order to offer a lowest selling price than the business -) this would lead to a significant number of customers switching to the competitors, offering the cheaper price -) leading to a significant fall in demand, can’t benefit from purchasing economies of scale 
54
Competitive pricing benefit
Competitive pricing may be effective as it insures the business is not outpriced by another -) this is particularly important in a very competitive price elastic market -) where there is a significant amount of substitutes -) increasing buyer power -) therefore prices need to remain competitive to avoid customers switching -) This insures that the business can have a high sales value and can benefit from purchasing economies of scale.
55
Competitive pricing drawback
Businesses charged similar prices to that competitors-) therefore prices do not give a competitive advantage -) forcing the business to become differentiated in another way -) for example, 3 unique product this will increase cost through R&D link to liquidity
56
Predatory pricing benefit
Price is reduced in order to attract customers from competitors -) who are unable to compete -) leading to failure and then closing down -) this reduces the level of competition in the market possibly creating a monopoly -) Therefore, customers have less choice, making the market price inelastic.
57
Predatory pricing drawback
However, pry pricing involves setting in extremely low prices -) Which could be lower than the cost of production -) This would lead to a very low gross profit margin or potential losses -) This would strain cash reserves in order to cover day-to-day running costs -) Link to liquidity
58
Psychological pricing benefit
Using using psychological pricing e.g. £99 -) it may convince consumers that products are more affordable, particularly impulse buyers -) leading to an increase in sales volume for business -) link to economies of scale
59
Psychological pricing drawback
However, using psychological pricing may not be effective -) as it does not consider factors that can affect the PED of certain products -) Therefore choosing a psychological price may lead to the business setting a price that’s too high -) if the product does not have a high level of differentiation-) it will result in a significant decrease in demand -) And reduce sales revenue and their operating profit -) Meaning they could retain less profit and invest less.
60
benefit of using intermediaries
choosing to sell through intermediaries eg wholesalers and retailers -) makes the product more widely available -) increasing accessibility for customers -) therefore more customers may purchase the products -) increasing sales volume -) link to economies of scale
61
drawback of intermediaries
however, intermediaries may have high levels of buyer power -) this means that they will be able to dictate terms to the business -) e.g. lower prices are longer periods of trade credit -) that far reducing cash inflows -) leading to a lower net cash flow -) link to liquidity
62
A benefit of direct distribution
choosing to sell directly to customers, increases the amount of control over the custom experience -) able to offer better customer service -) increase differentiation from competitors According to porters differentiation focus strategy -) increased customer loyalty -) more price inelastic
63
drawback of direct distribution
However, selling direct customers requires high investment -) as the business will need to set up their own distribution network -) they will need to purchase current assets e.g. stores or delivery vans -) link to liquidity
64
drawback of the development/introduction stage
When product is at the introduction and development stage, there will be significant investment in market, research and research and development (development) -) and promotion to raise awareness of new products(intro) -) This will significantly reduce cash reserve as there will be no cash info from sales during the development stage and low inflows during the introduction stage -) leading to liquidity
65
Benefit of growth stage linking to capacity utilisation?
when product is in the growth stage, sales will start to increase -) therefore, the business will be able to bake better use of their production capacity -) improve capacity used socialisation means that their fixed cost of production will be spread over more units -) lower unit fixed cost
66
Benefit of maturity stage
Products in maturity stage will see sales at the highest across the product life cycle -) as sales is at its peak business will achieve a economies of scale -) Link to appropriate EOS -) unit cost -) link to appropriate profit margin that would increase -) business can either retain and reinvest more profit or lower, the selling price to be more competitive
67
drawback of the declined stage
during the decline stage sales will start to fall -) less cash inflows from sales -) reducing cash reserves -) lower current assets -) link to liquidity 
68
however in the decline stage, what can the business sell to gain a benefit?
however as sales begin to decline due to changing trend -) business baby, able to sell obsolete assets, such as machinery, used in production of a product -) to generate cash that could be used to invest into R&D or market research of new products -) that are in the development stage -) to show that they have a balance product portfolio -) so they have spread risk and are less vulnerable in changes in trends
69
Benefit of extension strategy
when a product reaches the decline stage of the product life cycle -) business can introduce extension strategies such as adapting the product or advertising to a new market segment -) This extends the maturity stage -) so sales volume remains high -) and economies of scales can continue to be achieved
70
Drawback of extension strategies
however, extension strategies will require significant investment -) which means the business will have less cash to invest into the development stage of new products -) E.g. less prototypes can be developed or smaller samples will have to be used in market research -) new products, less likely to meet customer needs or reach introduction stage -) business will not be able to spread the risk and are more vulnerable to changes in consumer trends.
71
Drawback of Question Mark products
A Product has low sales but potential for high market growth -) It will need significant cash investment in market, research and research and development during the development stage-) promotion to raise awareness of the new product during the introduction stage-) This will significantly reduce cash reserve as there will be no cash info from sales during the development stage and info during the introduction stage -) link to liquidity
72
benefit of star products link to capacity
stop products have low market shared, but high market growth -) therefore sales will be increasing so the business will be able to make better use of the production capacity-) improving capacity utilisation means that their fix cost of production will be spread over more units, leading to lower unit fixed cost -) link to appropriate profit margin increasig -) reinvest
73
Drawback of dog products- liquidity
dog products will have a low market share and a low market growth -) fewer cash inflows from sales -) reduced cash reserves -) low current assets -) low current ratio -) business may not be able to be current liabilities -) have to sell non-current assets -) disrupting, business operations
74
benefit of dog product
Dog products will have a low market share and a low market growth -) however, they may establish products that require very little investment in promotion or R&D -) meaning the cost is very low -) a business can still retain a profit margin -) meaning they can retain this profit -) this retained profit can be used to invest into question mark Products-) that have the potential to be a future star or a cash cow -) Ed, showing products, portfolio remains balance and risk is spread
75
drawback of dog products
dog products may have a lower probability making a loss -) due to lower sales causing low output -) lower capacity Utilisation -) therefore fixed cost spread over fewer units -) higher unit fixed cost
76
Benefit of a cash cow
Cash cow products have a high market share and a high market growth -) therefore, sales volume is highest and the business will achieve economies of scale -) linked to appropriate type of a economies of scale -) unit costs will fall
77
product life cycle, Boston matrix and a balance product portfolio
if a business has products at all stages of the product, life cycle/each section of the Boston matrix -) they will have a balance product portfolio -) This means they have spread risk across multiple products -) and our less vulnerable to changes and consumer income/trends -) meeting they are likely to have a consistent cash inflow from sales -) link to liquidity
78
however, product life cycle, Boston matrix and a balance product portfolio
However, creating the maintaining balance product portfolio will require significant investment in all marketing activities, such as R&D, market, research and promotion -) meaning, ab business will require significant cash reserves, ability to seek additional sources of finance -) link to a drawback of the source of finance relevant to the business in question
79
benefit of marketing strategies for B2B business
Having a B2B, marketing strategy means a business is likely to use below-the-line promotional methods to build lasting relationships -) so that they could receive repeat orders of their products -) business can produce reliable cash flow forecast as more certain of regular cash inflows -) improve, reliability of business plan -) more attractive to banks -) to secure a loan with lower rates of interest -) current assets -) good liquidity 
80
Drawback of marketing strategies for B2B business
B2B marketing stretchy gets a smaller pool of potential customers -) as there are less businesses than individual consumers -) meaning that businesses may have a lower output -) lower capacity utilisation -) fix spread over less units -) increasing cost
81
benefit of marketing strategies for B2C business
B2C marketing strategy target, a wider pool of potential consumers -) as there is more consumers the businesses -) if marketing strategy is successful This increases the likelihood of high sales volume -) able to achieve economies of scale
82
Drawback of marketing strategies for B2C business
B2C marketing strategy targets a wider pool of potential customers -) however, as pool of customers is larger than likely to be a greater number of substitutes -) market will be more price elastic -) pressure for businesses to reduce prices in order to increase demand -) lower sales revenue and lower margins
83
benefit of treating staff as an asset
If a business treat their staff as an asset, e.g. through investment in training improving working conditions -) it will ensure that hygiene factors are present according to Hertzberg -) and allowing business to introduce motivating factors e.g. bonuses -) meaning their staff is likely to become more motivated -) Link to benefit of a motivated workplace
84
Drawback of treating staff as an asset
if a business treats their staff as an asset, e.g. through investment in training, proving working conditions -) This will need to allocate significant cash to HR budget -) meaning, less cash to allocate to other budgets such as R&D market research -) Less cash investment in this area means products are likely to be poorly designed -) e.g. poor functionality -) products may not meet custom needs -) fall in sales-) gross profit
85
benefit of viewing staff as a cost
if a business treats their stuff as a cost, e.g. lack of investment in trading or improving working conditions -) businesses can pursue a cost leadership strategy -) and gain a competitive advantage according to porters cost leadership strategy-) which will allow the business to reduce their selling price which will lead to an increase in demand.
86
A drawback of a business viewing staff as a cost
if a business treat staff as a cost, e.g. lack of in investment in training or improving working conditions -) Hygiene factors may not be present according to Hertzberg -) lack of hygiene factors will mean that staff become demotivated -) link to impact of demotivated workforce E.g. reduction in productivity poor customer service or high labour turnover.
87
benefit of a flexible workforce
flexible, working such as flexible time or home working -) will allow employees time to work around other commitments -) This shows that their love and belonging needs and met according to Maslow -) employees love and belonging needs a met employees will become more motivated -) Link to a benefit of motivated workforce
88
Drawback of flexible work
flexible, working such as Flexi-time or home working-) will be that the employees are completing their daily task at different times of the day or in different places -) which may mean that teamwork is difficult to implement -) this can make it difficult to create a task culture or creates a weak culture -) as business is unable to use teamwork to generate innovative ideas -) products are less differentiated making them more price elastic
89
Benefit of collective bargaining
if a business allows employees to negotiate conditions as an organised body -) it would improve relationships between employers and employees -) hygiene factors present according to Herzberg as working conditions have been improved -) business can introduce motivating factors e.g. job, enrichment, or empowerment -) improvement employee motivation-) link to benefit of a motivated workforce
90
drawback of collective bargaining
If a business allows employees to negotiate conditions as an organised body -) It is likely that the business may have to make some changes to the working conditions -) this means the business will allocate cash to HR budget -) less cash to invest into marketing activities, such as R&D market research -) products, and services less likely to meet customer needs -) lower sales volume -) less likely to achieve economies of scale choose appropriate one -) increased unit costs
91
benefit of internal recruitment - culture
Internal recruitment insures that employees already know and share values of business -) meaning businesses can maintain a strong culture -) and positive working relations with managers -) insuring employees' love and belonging needs a met according to my hierarchy of needs
92
Drawback of internal recruitment
recruiting internally will create another vacancy that the business will need to fill -) this may limit the businesses ability to increase capacity -) limiting capacity may reduce the businesses ability to achieve economies of scale -) that will be spread across less units
Lack of innovation, as there is no new employees to bring new skills into the business
93
Benefit of external recruitment
why do people have potential candidates to recruit from -) increase chance of introducing new ideas or improved skills into the business -) business more likely to design differentiated products or increased productivity or offer improved customer service -) or increase level of productivity -) link to PED or EOS
94
Drawback of external recruitment
external recruitment is more likely to increase a businesses expenses -) as the business needs to advertise externally or use an external recruitment agency -) an increase in businesses expenses will reduce their operating profit margin
95
Benefits of on the job training
on the job training will reduce a business expenses -) as they will not need to utilise a specialist external trainer -) who is likely to charge high prices for their service -) meaning they can maintain a high operating profit margin, and will have more profit to retain and reinvest into building scale
96
Drawback off on the job training
Training on the job may mean employees are completing tasks through trial and error -) this may result in employees, not being a skilled in the short term -) therefore that may be a dropping productivity and fix cost spread over less units leading to Lower unit fix cost -) OR -) employees giving poor customer service business will lack differentiation and become more price elastic
97
benefit of off the job training
Off the job training is likely to be provided by a specialist trainer -) this will mean that implies will be provided with superior knowledge and skills-) compared to being trained on the job by a non-specialist -) employees with superior knowledge our skills are likely to return to the business and be more proactive. E.g. manufacturing are deliver exceptional customer service if it’s a service business making them more price in elastic as they are differentiated.
98
drawback off of the job training
off the-job training will mean that employees are absent from their role for a period of time -) this means drawing the time the business may experience a drop in productivity, meaning the business may experience a falling output and fixed cost of production will be spread over fewer units, increasing unit cost -) OR -) a reduction in employees present mainly to poor customer service. This may damage the business's brand reputation, reducing customer loyalty, and leading to products being more price elastic.
99
benefit of centralised organisational structure
Decisions for the organisation are made by singular power source, such as a leader or a director from the head office -) therefore no delegation or consultation is needed -) ensures quick decision-making -) business is able to quickly adapt to changing trends
100
Drawback of a centralised organisational structure
decisions for the organisation made by singular power source, such as a leader or Director from the head office -) therefore no delegation of consultation is needed -) employees don’t feel valued by the organisation as they are not included in the decision making process -) esteem needs not met according to Maslow which makes them demotivated
101
Benefit of decentralised, organisational structure
different parts of the organisation such as area managers are department managers have the authority to make decisions which are suitable for their area -) more adaptable to the needs of their staff or customers choose based on case study -) quick decision, making meaning the business is able to keep up with changing trends -)
102
Drawback of a decentralised, organisational structure
as key decisions will need to be made by lower ranking managers -) they will need to be of appropriate skill to ensure that the correct decisions are made -) This will require significant investment in training leading to increase cash outflows -) link to liquidity
103
Benefit of a tall structure
increase the number of layers in the organisational chart -) increase number of managers leading to narrow spans of control -) improve levels of supervision for managers -) more effective feedback to employees -) Mayo, Hawthorn effect -) improved skill of employee -) increased productivity or increased quality PED
104
drawback of a tall structure
Increased the number of managers increases the cost of salaries as managers are paid more than average employees -) increased fixed cost -) operating profit margin -) lower retain profit -) less cash available for investment in non-assets such as
105
Benefit of a flat structure
less managers, leading to a wider span of -) reduced supervision of employees -) opportunity for my delegation or managerial responsibility -) it has challenge for employees improving job enrichment -) satisfy employee esteem needs, according to Maslow’s hierarchy of needs -) improved motivation, increasing quality of work to PED
106
Drawback of a flat structure
less managers leading to a wider span of control -) increased number of subordinates for managers -) communications between managers and subordinates -) less effective feedback/support on performance -) Reduce productivity as employees are less able -) fixed cost spread over less units leading to higher unit fixed cost
107
Benefit of a matrix structure
employees are organised in teams -) where ideas are more important than hierarchy or position -) effective collaboration between employees -) improve, teamwork, leading to improve motivation according to Mayo -) more effective ideas developed in the organisation, improving innovation -) creating more differentiated products, or services -) price inelastic
108
Drawbacks of the matrix structure
less emphasis on hierarchy with no clear lines of accountability and responsibility -) where ideas are more important than hierarchy opposition -) in effective staff development -) would reduce level of expertise of employees Give example in case study -) less effective ideas from employees -) products, or services less advanced than competitors -) lower cash, inflows, leading to lower net cash, causing lower cash reserve reducing current ratio
Issues with productivity as less managers make decisions therefore harder to pass as there’s no accountability as there is reduced managers
109
benefit of a sole trader
soul traders are the only owners of a business -) therefore they can maintain full control of day-to-day running -) able to establish a strong power culture -) maintain consistency throughout the business -) build a strong brand image, which makes them differentiated from competitors, making them price inelastic
110
drawback of sole trader
unlimited liability -) increase risk of investment -) if businesses, debts, exceeded businesses assets, they may need to sell personal possessions -) this increases risk which will make investment less attractive -) leading to reduced investment, less and less assets
111
Benefit of a partnership
knowledge and experience from both partners, improving innovation differentiation price inelastic
112
Drawback of a partnership
unlimited liability -) increase risk of investment -) if businesses, debts, exceeded businesses assets, they may need to sell personal possessions -) this increases risk which will make investment less attractive -) leading to reduced investment, less and less assets
113
benefit of an LTD
private limited companies can choose their shall holders therefore choose people who match their objectives, e.g. passion for innovation. This might be less focus on short term objectives like profit maximisation as they should go on R&D and investment can reinvest more into R&D growth rather than being pressured to pay, regular dividends or high dividends, able to innovate and pursue objectives, differentiate from the competitive in the long term and price inelastic.
114
drawback of a LTD
private limited companies are unable to sell their shares on the stock market. This can make it more difficult to raise large amounts of capital so the business may find it difficult to build scale limits the amount of R&D they can pursue less innovation less differentiated products
115
Benefit of a plc
I’ve gone through stock market rotation. Therefore their shares are advertised to an ex accessible to the public. Due to this. They consult a large volume of shares leading to a significant amount of capital being generated, increasing cash available to invest in non-current assets, so the business can build scale.
116
Drawback of a plc
public limited companies shares are sold to the public -) Therefore there is more pressure from shareholders for short term profits -) so the business may neglect long-term objectives for short term returns to satisfy shareholders by using profit to pay regular dividends -) neglecting investment into R&D to develop innovative products, products become less differentiated in the long term
117
benefit of franchisor
becoming a franchisor means allowing independent businesses to use your brand name -) this means that the franchisee provides the capital to open your branches/stores -) therefore reducing their capital required for expansion -) leading to the franchisor, being able to expand much quicker -) link to EOS
118
drawback of franchisor
however, franchisiors risk damaging their brand reputation as they are not responsible for the day-to-day running of the outlet -) the franchisee may fail to uphold high levels of customer service -) due to a lack of supervision from franchisor -) customer service in one outlet could then affect the reputation of others -) mini customers may switch to a rival business reducing sales revenue and reducing gross profit
119
Benefit of franchisee
becoming a franchisee means paying to use another business as brand name -) this means they already have access to a well known brand -) therefore there are already customers who have brand loyalty -) making the business more price and inelastic -) the franchisee can charge higher prices than independent businesses as customers will be willing to pay them -) leading to increase revenue and profit margins and more retain profit to invest in opening further franchises
120
Dropback of franchisee
becoming a franchisee means paying to use another business is brand name -) lady to hire cost as fees and royalties will need to be paid -) therefore leading to increase cash outflows -) link to liquidity
121
Opportunity cost
when the business chooses to -) they Fargo the next best alternative (name the alternative from the case study) -) This means they miss out on the benefits of the alternative -) identify the benefit of the alternative from the case study -) link to reduced economies of scale or high price, elasticity line of analysis
122
Trade-off
when the business chooses one alternative instead of another -) they gain less of the option they gave up -) explain the impact of this link to either the reduced economies of scale or high price, elasticity line of analysis
