Understanding business Flashcards
(19 cards)
Internal growth
Launch new products- can meet needs of different market segments
Hire more staff- make more sales and better decisions
Expand existing branches- cater for more products/ staff and make more sales
Takeover
This means one business buying another
Advantages
- can spread risk of failure
- competition is reduced which will increase sales
Disadvantages
- Can be expensive to acquire other business
- Can be bad for customers as less competition which means higher prices
merger
two businesses agreeing to join forces and become the one organisation
Advantages
- Market share and resources shared which spreads risk of failure and increases profit
-can overcome strong competition to entering market
Disadvantages
- Bad for customers because less competition means higher prices
- customers can be put off if new logo is created
horizontal integration
when two businesses in the same sector of industry become one.
Advantages
- competition reduced
- can dominate market
- Can raise prices
Disadvantage
-Quality may suffer due to lack of competition
Forwards vertical integration
when two businesses from different industries become one
Advantages
- cutting out middle man can increase profits
-business can control the supply of their products and could mot supply competition
Disadvantages
-focusing on new activities can harm core activities
- company may not be able to manage activities efficiently, meaning higher costs
backwards vertical integration
business takes over or merges with supplier
Advantages
- guaranteed and timely supply of stock
-stock is cheaper as no need to pay supplier marked up prices
Disadvantages
- Focusing on new activities can badly effect core activities
- company may be incapable of managing new activities so higher costs
Conglomerate integration
when business in different markets join together
Advantages
- The firm acquires the assets of other companies
-makes firm larger and more financially secure
Disadvantages
-business may become too large to manage
-May take on business in a market they know nothing about and cause it to fail
Tall structure
many levels of management and resembles a large pyramid.suits large organisations with many specialised departments
Advantages
- staff know their role and who to report to
-many promotion opportunities which motivates staff
Disadvantages
-slow to react to changes in market
-communication may take time to flow through levels which slows decision making
Flat structure
Pyramid shape and commands flow from top to bottom. three levels of management and suits small organisations
Advantages
- Info quickly passed between levels
-can respond quickly to external factors
Disadvantages
- Less levels of so less promotion opportunities so quality of staff nay leave to larger organisations
- Wide span of control so less time for planning
Centralised
decision making and control kept at top of organisation (senior management)
Advantages
-standardised procedures ensures consistency
- Low risk of important info leaking from branches
Disadvantages
-less responsibility given to subordinates which can demotivate staff
- Decisions do not reflect needs of local markets
Decentralised
decision making delegated to branches or departments
Advantages
-Business reacts to changing external factors quickly
-More subordinates are empowered which encourages creativity
- relieves senior management of burden of constant decision making
Disadvantage
- Local branches may start competing with one another if they’re aloud to make key decisions
Line relationship
relationship between superior and suborinate
Lateral relationship
Relationship between two employees on same level of management
Functional relationship
relationship between two departments
Staff relationship
An advisory role
Authority
Power to make important decisions
Delegate
Passing management tasks to subordinates
Span of control
The number of subordinates working under a superior
Empowerment
Staff being given decision making power
