Unit 1: 1.5 Growth + Evolution + MNC Flashcards
(91 cards)
1
Q
What does the STEEPLE tool do?
A
examines external environment, the opportunities and threats AKA things you react to.
2
Q
S in STEEPLE
A
social environment; cultural and demographic change can directly affect activities of a business
3
Q
Some examples of S in STEEPLE
A
- role of women, children in society
- social welfare, business ethics
- spread of multi-culturalism (immigration)
- education levels, languages, wealth, population totals.
4
Q
T in STEEPLE
A
technological environment; affects ALL aspects of business functions
5
Q
Some examples of T in STEEPLE
A
- infrastructure (roads, rail transit, ports)
- internet
- AI
- cybersecurity
6
Q
How does T in STEEPLE affect all business functions?
A
HR: working from home
marketing: social media
finance: financial information reports online
operations: tracking shipments around world
7
Q
The first E in STEEPLE (order doesn’t matter)
A
economic: a country’s economy is doing as it relates operations of business
8
Q
Some examples of the first E in STEEPLE
A
- inflation
- fiscal policy
- monetary policy
9
Q
What is inflation?
A
prices go up while income stays the same.
10
Q
Why does inflation happen?
A
2 ways:
demand pull: large demand = increased price, we cause inflation
cost push: costs more to produce goods or services which increase people’s salaries
11
Q
What is fiscal policy?
A
adjusts taxes to increase spending and put more people to work.
12
Q
What does fiscal policy do?
A
helps in inflation when tax % increases, it slows spending (which causes inflation)
high tax % = stop spending
low tax % = speed spending
13
Q
What is monetary policy?
A
adjust money supply by changing interest rates.
14
Q
What does monetary policy do?
A
lower interest rates = easier to borrow money to spend
15
Q
What is the discount rate? WILL BE ON EXAM MR. HOGAN
A
interest rate that the government banks charge member banks.
16
Q
The second E in STEEPLE
A
environmental: factors such as climate, environmental regulations
17
Q
Some examples of the second E in STEEPLE
A
- climate change
- natural disasters
- sustainability practices
- energy use
18
Q
P in STEEPLE
A
political: impact of political factors such as policy, stability, tax, trade on the organization
19
Q
Some examples of P in STEEPLE
A
- government policy
- relationship between countries
- security/terrorism
- lobbying/advocacy
- political stability/instability
- tax regulations (also economic)
20
Q
L in STEEPLE
A
legal: impact of laws and regulations on a business
21
Q
Some examples of L in STEEPLE
A
- business laws
- employment laws
- consumer protection laws
- environmental laws
22
Q
The third E in STEEPLE
A
ethical: impact of morals, right or wrong, CSR
23
Q
Some examples of the third E in STEEPLE
A
- CSR
- fair trade
- workplace ethics
- transparency
24
Q
What is Laissez-Faire?
A
government takes relaxed approach to watch business activity
25
What does Laissez-Faire do?
- allows businesses to grow without a lot of government regulations
- businesses will develop competition among themselves
26
What is interventionist?
government uses regulations and policies
27
What types of things does interventionist governments do?
- fiscal policies
- monetary policies
- discount rate
28
What is economies of scale?
the reduction in a firm's unit costs of production that results in an increase in the scale of operations. (lower costs by increasing output)
businesses chose to grow because they want to benefit from this
29
Advantages of EOS
- increased profits
- generating higher return on investment
- larger business scale
- solidification of business and becomes less vulnerable
30
What does average cost mean?
the cost per unit of output
31
How do you find the average cost?
total cost/quantity
32
What are internal economies of scale?
economies of scale that happen within the companies control.
33
Types of internal EOS
- technical
- financial
- managerial
- specialization
- maketing
- purchasing
- risk-bearing
34
What are technical economies?
large firms can use sophisticated capital and machinery tp mass produce products
35
What are financial economies?
large firms can borrow large sums of money at lower rates of interest compared to smaller companies
36
What are managerial economies?
people cannot be equally good at everything, therefore, specialization leads to higher productivity and therefore average costs fall.
37
What are specialization economies?
similar t managerial but results from division of labour.
38
What are marketing economies?
large firms benefit from lower average cost by selling in bulk
39
What are purchasing economies?
large firms can lower average cost by buying resources in bulk
40
What are risk-bearing economies?
savings by diversification of products/services offered in the market.
41
What are external economies of scale?
large firms benefit from outside the business due to favorable location or growth in industry.
42
Types of external EOS?
- technology
- skilled labor
- regional specialization
43
What are technology external EOS?
- infrastructure
- internet access
- ports for shipping
44
What are skilled labor external EOS?
- higher education centers
- centers providing large pool of trained workers
45
What are regional specialization external EOS?
specific area has a highly regarded and trustworthy reputation for producing a certain good
46
What are internal diseconomies of scale?
occurs when a business becomes outsized and average costs begin to rise
47
Why does internal diseconomies of scale happen?
when the expansion of output comes with increasing average costs because a business has not grown enough to be able to increase output
- loss of control, poor communication, worker alienation
- labor force problems, bored workers, slackers
- complacency, become too comfortable as a company
48
Types of internal DOS?
- loss of control
- labor force problems
- complacency
49
Loss of control in IDOS
poor communication, worker alienation
50
Labor force problems in IDOS
bored workers, slackers
51
Complacency in IDOS
become too comfortable as a company
52
What are external diseconomies of scale?
increase in average cost due to factors beyond company's control
53
Types of external DOS?
- location
- competition for labor
- infrastructure
54
Location in EDOS
scarcity of real estate increase rent
55
Competition for labor in EDOS
employees can move in and out of jobs (may need to offer higher pay and benefits)
56
Infrastructure in EDOS
traffic congestion, delays in transportation
57
What are small and large organizations measured by?
- market share, sales revenue as % of industry
- total revenue, annual sales turnover
- workforce size, # of workers
- profit, revenue - expenses
58
Advantages of being a small organization
- cost control
- flexible to change
- personal service
- easier to communicate
- small market town
- low barriers to entry
- better cost-control
59
Disadvantages of being a small organization
- limited money
- no benefit to EOS
- large risk burden on owners
- risk to external environment
60
Advantages of being a large organization
- recognize brand
- value added service
- greater choice
- customer loyalty
- specialization
- sources of money
- research/develop
61
Disadvantages of being a large organization
- communication
- cost control
- efficient problems
- customer service
- less flexible
62
What is internal (organic) growth?
business using own capabilities and resources to increase scale of operations
63
How is internal (organic) growth done?
ANSOFF MATRIX
- market penetration, change price, promotions
- product/service development, add value, more locations to purchase, credit offerings, training + development
64
What is external (inorganic) growth?
occurs through deals made with outside organizations
65
Why do businesses do external growth?
- faster model
- reduce competition
- greater market share/power
- shared knowledge + ideas
- spread risk
66
How do businesses do external growth? What are the methods?
- mergers and acquisitions
- joint-ventures
- franchise
- strategic alliance
67
Advantages of mergers and acquisitions
- greater market share
- EOS
- synergy
- survival
- diversification
- gain entry to new markets
68
Disadvantages of mergers and acquisitions
- redundancies
- conflict
- culture clash
- loss of control
- diseconomies of scale
- regulatory problems
69
What are mergers and acquisitions? Horizontal integration
merging firms in the same industry
70
What are mergers and acquisitions? Vertical integration
merging firms in different sectors
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What are mergers and acquisitions? Lateral integration
merging similar firms but they do not compete against eachother
72
What are joint-ventures?
two or more firms join and split costs to start new legal business. A+B=C.
only for a limited period of time and by the end of the contract can end or continue
73
Advantages of joint-ventures
- product service development
- save money for both parties
- save time
- new tech/new markets
- does not require long term commitment
- acquire new business associates
74
Disadvantages of joint-ventures
- culture clash
- communication issues
- loss of control
- conflict over strategies
- sharing sensitive info
75
What are franchises?
a business where one party (the franchisee) acquires the access to the processes and trademarks of an established business (the franchisor)
the franchisee buys right t sell a product/service under an established brand
76
Advantages of franchisor
- brand recognition
- less risk
- no direct managing responsibilities
- higher profitability
77
Disadvantages of franchisor
- financial info shared
- initial costs
- limited flexibility
- less privacy
78
Advantages of franchisee
- reduced risk
-lower costs (buying power)
- established brand
79
Disadvantages of franchisee
- dependent on the franchisor
- limited creative opportunity
- shared financial info
- costs
80
What is a strategic alliance?
two or more businesses join together and split costs to cooperate in a business venture. (but no new business entity is created)
81
Advantages of strategic alliances
- pooling of resources
- synergy
- wider channel of distribution
82
Disadvantages of strategic alliances
- business culture clash
- lack of control
- merged reputation
83
What is globalization?
integration and interdependence of the world's economies, cultures, and populations.
84
How is globalization done?
using ansoff matrix market development
85
Why is globalization done?
- less global trade barriers
- technology progress
- deregulation of business activity
- cultural awareness
- common language
86
What is foreign direct investment (FDI)?
investment made by a company in one country buys a company in another country.
87
Why do MNCs go global?
- saturation of domestic markets
- labor costs
- more closer to global customers
- spread risk
- external EOS
- government incentives
- increase revenue
- lower cost of production
- natural resource extraction/source raw materials
88
What are multinationals?
an organization that works in two or more countries
89
What are transnationals?
same as MNCs but does not identify with any single nation
90
The impact of MNCs on host countries: Advantages
- skills and technology
- savings and investment
- tax revenues
- local industry
- employment
- economic growth
- foreign exchange earnings
91
The impact of MNCs on host countries: Disadvantages
- environmental degradation
- inappropriate consumption
- use of government resources
- economic and political power over countries
- competition to attract MNCs
