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topic 9 Flashcards

1
Q

reasons for growth

A

to increase profits/revenue
-increase market share
-reduce average costs

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2
Q

what is retrenchment

A

-downsizing the scale of the business operations e.g delayering, closing branches

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3
Q

possible reasons for retrenchment

A
  • restructuring to increase efficiency
    -turn around poor performance
    -focus on core business
  • sell off less profitable parts of the business
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4
Q

what is organic growth

A

when a firm grows with its existing businesses

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5
Q

what is external growth

A

growth that is dependent on other businesses and maybe via mergers, takeovers or joint ventures

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6
Q

what are economies of scale

A

arise when unit costs fall as output increases

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7
Q

how to calculate unit costs

A

total production costs in period/total output in period

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8
Q

diseconomies of scale

A

average costs start rising

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9
Q

internal economies of scale

A

arise from the increased output of the business itself

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10
Q

what is external economies of scale

A

occur within an industry- all competitors benefit

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11
Q

what is purchasing economies of scale

A

supermarket chains- much lower prices from key suppliers, than smaller retailers

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12
Q

technical economies of scale

A

can buy more machinery, ad use capital intensive and automated production

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13
Q

what is managerial economies of scale

A

can afford specialist managers with expertise

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14
Q

what is marketing economies of scale

A

spreading a fixed marketing spend over a larger range of products, markets and customers

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15
Q

what is network economies of scale

A

adding extra customers or users to a network that is already established

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16
Q

external economies of scale

A

occur when a whole industry grows larger and firms benefit from lower long- run average costs
e.g having ,any specialist suppliers close by, access to research and development facilities

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17
Q

economies of scope

A

where it is cheaper to produce a range of products rather than specialise in a very limited number

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18
Q

Diseconomies of scale

A

lead to a rise in unit costs

-control- problems n monitoring productivity and work quality, increasing wastage of resources.

-negative effects of internal politics

-co-operation- workers in large firms may develop sense of alienation

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19
Q

what is overtrading

A

happens when a business expands too quickly without having the financial resources to support such a quick expansion.

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20
Q

why might overtrading happen

A

sales are made on credit and customers take too long
significant growth in inventories

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21
Q

symptoms of overtrading

A

-high revenue growth but low gross and operating profiting profit margins
-persistent use of a bank overdraft facility
-significant increases in the payables days and receivables days ratios.
-significant decrease in the current ratio
-very low inventory turnover
-low levels of capacity utilisation

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22
Q

how could you manage the risk of overtrading

A

-reducing inventory levels
-scaling back the pace of growth until profit margins and cash reserves have improved
-Leasing rather than buying capital equipment
-obtaining better payment terms from suppliers
-enforcing better payment terms with customers

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23
Q

synergy

A

when two businesses come together and the value of them together is higher than the individual businesses.

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24
Q

sources of synergy

A

Cost savings: eliminate duplicated functions and services
-better deals for suppliers
-higher productivity and efficiency from shared assets.

Revenues: cross selling to customers of both businesses
-access to new distribution
-brand extensions
-new geographic markets opened up

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25
retrenchment
'to cut down or reduce something', 'use resources more carefully'
26
examples of retrenchment
tesco exits its US chain in 199 fresh and easy shops, made it make a profit of 1.2 bn microsoft- simplifying the way they work
27
what is organic growth
involves expansion within a business
28
examples of organic growth
dominos, costa coffee
29
advantages of organic growth
less risk than external growth -can be financed through internal funds -can be financed through internal funds -builds on a business' strengths
30
disadvantages of organic growth
-growth achieved may be dependent on the growth of the overall -hard to build market share -franchises can be had to manage effectively
31
what is franchising
32
benefits of franchising
running your own business -tried and tested brand -advice, support, training easier to raise finance buying power of franchisor lower the risk of market entry
33
drawbacks of franchising
-not cheap -restrictions on actions -franchisor owns the brand -franchisor may fail.
34
why franchising works for the franchisor
a classic growth strategy for a proven business format -enables much quicker geographical growth for a relatively low investment
35
what is a joint venture
a separate business entity created by two or more parties, involving shared ownership, returns and risks.
36
benefits of a joint venture
benefit from each others expertise and resources -might have the option to acquire in the future the joint venture business based on agreed terms -reduces the risk of a growth strategy
37
examples of joint ventures
Microsoft and general electric NBC and disney
38
what is a takeover
involves one business acquiring control of another business
39
reasons for takeover
increase market share access economies of scale secure better distribution
40
directions of integration
forward and vertical- acquiring a business further up in the supply chain backward and vertical- acquiring a business operating earlier in the supply chain- e.g a retailer buys wholesaler horizontal- acquiring a business at the same stage of the supply chain- e.g a manufacturer buys a copmpetitor. conglomerate- where the acquisition has no clear connection to the business buying it
41
what is invention
formulation of new ideas for products or processes
42
what is innovation
practical application of new inventions into marketable products or services
43
what are the two types of innovation
product innovation process innovation
44
advantages of product innovation
higher prices and profitability opportunity to build early customer loyalty enhanced reputation as an innovative company pr coverage increased market share
45
examples of businesses with product innovation
dyson apple
46
advantages of process innovation
reduced costs improved quality more responsive customer service greater flexibility higher profits
47
what is kaizen
a culture where you continuously improve the business, through developing an innovative culture
48
what is globalisation
a process I n which national economies have become increasingly integrated and inter-dependent
49
benefits of globalisation
access to new markets economies for scale cheaper due to containerisation reduced tariffs
50
negatives of globalisation
greater global competition exchange rates cultural consideration geopolitical development less coordination
51
what is protectionism
when a country seeks to product domestic industries from foreign competition.
52
what are emerging economies
an emerging market economy is transitioning from a low-income, less developed, often pre-industrial economy toward na modern, industrial eco noms with a higher standard of living
53
positives of emerging markets
high economic growth -large populations -rising middle incomes -greater openness to trade developing regulatory systems
54
potential limitations of emerging markets
political volatility -economic volatility- inflation -poor infrastructure
55
what makes emerging markets attractive
high economic growth -little competition -first mover advantage -own domestic markets may be saturated -scope economies of scale
56
key reasons why international markets are targeted
-reducing dependence on domestic market -accessing faster-growing market and demand -achieving economies of scale -better serving customers located overseas -building brand value, particularly global brands.
57
key factors that influence the relative attractiveness if an international market
size and growth of target customer base -ease of entry to an international market -extent to which product will need to be adapted. -economic conditions in the target economy
58
four key methods of entering an international market
exporting direct to international customers -selling via International agents and distributors opening an operation overseas -joint venture or takeover
59
benefits of exporting directly
uses existing systems online promotion makes this cost effective can choose which orders to accept Direct customer relationship established
60
drawbacks of exporting directly
potentially bureaucratic No direct physical contact with customer risk of non-payment -customer service process may need to be extended.
61
what is barlett and ghoshalmodel
indicates the strategic options for businesses wanting to manage their international operations based on two pressures: local responsiveness and global integration.
62
force for local responsiveness
-of customers in each country expect the product to be adapted to meet local requirements -do local competitors have an example due to the higher responsiveness.
63
force for global integration
is consistent global branding required to achieve international success -
64
what Is a multi domestic strategy
aims to maximise benefits of meeting local needs through extensive customisation. decision making is decentralised. local businesses treated as separate businesses strategies for each country. high pressure for local responsiveness, low pressure for global integration. e.g nestle
65
what is global strategy
low pressure on local responsiveness, high pressure for global integration. key features: highly centralised, focus on efficiency, standardised products. e.g CAT and Pfizer
66
what is offshoring
offshoring involves the relocation of business activities from the home country to a different international locations.
67
difference between offshoring and outsourcing
offshoring: the work is done overseas outsourcing: someone else does the work
68
why do businesses move production overseas
manufacturing costs lower -potentially better skilled and higher quality -makes use of existing capacity overseas -take advantage of free trade areas.
69
drawbacks with offshoring
longer lead times for supply -implications for CSR -additional management costs -impact of exchange rates -communication of language and time zones.
70
what is reshoring
movement of business activities from overseas back to the home country.
71
key pressures on businesses to adopt digital technology
serve existing customers better via data analysis -reach new customers in new segments and locations -offer new ways of delivering products and services using digital technology
72
what is e-commerce
involves digitally enabled commercial transactions between and among organisations and individuals.
73
how does e-commerce impact porters five forces
rescued barrier to entry
74
what is creative destruction
where innovation challenges the existing model.
75
what is big data
the generation. of humongous amounts of data that are too large for many software applications to handle.
76
reasons for the exponential growth of big data
retail e-commerce databases -user interactions with websites, mobile apps
77
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.
78
example pf how data mining can help a business improve competitiveness
sales forecasting: analysing when customers bought to predict when they will buy again.
79
what is CRS
corporate social responsibility
80
concept links of corporate social responsibility
shareholders sustainability business ethics profit stakeholders
81
what factors give a company a good reputation of community and environmental responsibility
treat employees fairly no pay gap using renewable energy sources going over and above.
82
difference between CSR and business ethics
ethics concern actions which can be assessed as right or wrong by reference to moral principles. -CSR is about the organisations obligations to all stakeholders- and not just shareholders.
83
which are the main areas businesses need addressing according to a survey
corporate and tax avoidance- 33% executive pay- 29% environmental responsibility- 28%
84
what is CSR
the extent to which a business addresses the concerns and obligations to its wider stakeholders -the actions a business takes over and above the minimum required by law in addressing societal needs and wants
85
why are businesses and society interdependent
businesses - create employment and wages - investment and innovation - profits and taxes society - create demand - public assets and infrastructure - legal protection
86
societal needs
better nutrition better health financial security protect consumers education help the ageing protect the environment
87

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