Unit 3 Topic 1 - Competitive Markets

Question 1

1.1.2 Describe business facts and characteristics relating to businesses in the maturity stage of the life cycle including:
* operating environmental factors of:
- a domestic market
- a global market

Answer 1

External operating environmental factors consist of:
* Customers: Customers can influence repositioning and the need for change as they impact the way in which businesses operate. Repositioning and/or responding to the need for change is necessary for businesses as customer needs and demands evolve.

• Competitors: Businesses are directly impacted by the activity of competing organisations as they both must respond to changes in the business environment to attain the highest market share. Thus, businesses may be forced to reposition or respond to the need for change due to their competitor’s actions.
• Suppliers: Suppliers hold significant influence over a business’ pricing strategy, the quality of their products and their ability to operate. Suppliers can influence a business to reposition or implement change, potentially through seeking alternative suppliers due to unaffordable pricing and/or quality concerns.

Question 2

1.2 Describe business facts and characteristics relating to businesses in the maturity stage of the life cycle including:
* macro environmental factors of:
- a domestic market
- a global market

Answer 2

Macro environmental factors consist of:
* STEEPLE: Socio-cultural, technological, economic, environmental, political, legal, ethical

Question 3

1.3 Explain
­ * the maturity stage of the business life cycle

Answer 3

Businesses in the maturity stage of the business life cycle are well established and have secured a dominant presence in their industry. It is typically the lengthiest stage a corporation will undergo. Stabilisation of profits should be evident in the maturity stage and while business growth may continue, it will not occur at the same rate as that of the growth stage.
For example, Apple is a mature business as evident in its year-on-year revenue, although minimal growth persists, Apple’s revenue has largely plateaued in recent years, which is reminiscent of a mature business.

Question 4

1.3.1 Explain
* the challenges of the maturity stage in the business life cycle

Answer 4

Challenges faced by businesses during the maturity stage may include:
* Environmental factors
* Changes in the economy
* Society or market changes
* Heightened competition in an increasingly saturated market
* Rival companies vying for market share
* Emerging technologies and innovations in the industry necessitating evolution within mature businesses to ensure they remain relevant

Question 5

1.4.1 Explain
* the strategies a business may adopt to expand
D

Answer 5

• Developing a niche market: small section of the broader market that has a unique set of characteristics, specialising in a particular product, service or demographic. It enables smaller businesses to contend with larger corporations that retain the majority of the market share.

Question 6

1.4.2 Explain
* the strategies a business may adopt to expand
Ex

Answer 6

• Exporting products or services: where a business sells its domestically developed products or services to overseas purchasers. Exporting enables businesses to expand, as it broadens their customer base and increases profitability.

Question 7

1.4.3 Explain
* the strategies a business may adopt to expand
I

Answer 7

• Innovation: the practice of making change to something that already exists, generally through introducing new methods, concepts or products. Innovation is essential to uphold a competitive advantage and to maintain or increase market share when expanding.

Question 8

1.4.4 Explain
* the strategies a business may adopt to expand
R

Answer 8

• Research and development: the activities a business undertakes to gain knowledge, enhance or innovate current products or services and advance its procedures. R&D can provide businesses with a competitive advantage, ensure they stay relevant and assist them to discover cost-saving measures. A mature business may use R&D for international expansion by researching countries and cultures.

Question 9

1.4.5 Explain
* the strategies a business may adopt to expand
Em

Answer 9

• Emerging technologies: new technologies that are crucial to business expansion since they often have the capacity to revolutionise their business area. Emerging technologies can provide businesses with benefits such as driving business growth and establishing niche markets.

Question 10

1.5.1 Explain
* ­the modes of entering global markets
L

Answer 10

• Licensing: a contractual agreement which enables a business to utilise the intellectual property of another business. The purchase of such a license permits the business to use business expertise, patents, designs or brands in a different market or foreign country with minimised risk. There are two types of licenses: exclusive which authorises solely the licensee to use the IP and and non-exclusive which allows for multiple licensees including the licenser.
  Franchising is a type of licensing which can assist a corporation to enter global markets, as demonstrated by franchises such as McDonald’s or KFC.

Question 11

1.5.2 Explain
* ­the modes of entering global markets
I

Answer 11

• International agents and distributors: A local partner who can act as a distributor or local agent is deemed to be a necessity in some countries, predominantly those in Asia. It can assist an organisation in navigating its international growth, with further support in the form of grants and incentives often available. Agents serve as a representative of the supplier without assuming ownership of goods, while distributors purchase goods and resell them to local retailers or consumers.

Question 12

1.5.3 Explain
* ­the modes of entering global markets
St

Answer 12

• Strategic alliance: partnerships formed by two businesses, resulting in mutual benefits such as access to a new market or technology. Typically, strategic alliances have a restricted scope as the participating businesses retain their independence without forging a new entity.

Question 13

1.5.4 Explain
* ­the modes of entering global markets
J

Answer 13

Joint ventures: a collaborative arrangement between two or more firms with complementary business acumen. It involves the businesses obtaining mutual benefits by combining their resources and expertise to jointly establish a separate, subsidiary entity offering additional products or services.

Question 14

1.5.5 Explain
* ­the modes of entering global markets
O

Answer 14

Overseas manufacturing: a common strategy to facilitate international expansion. Businesses can utilise outsourcing or offshoring as a means of relocating their activities. While outsourcing involves re-situating particular activities within the business to external professionals, offshoring is the transfer of employee positions to different countries to gain advantages such as reduced expenses.

Question 15

1.5.6 Explain
* ­the modes of entering global markets
Sa

Answer 15

Sales subsidiary: A subsidiary company is overseen and owned by an overarching company, referred to as a parent company. Sales subsidiaries sell the goods of the parent company. For instance, in 2012 Instagram became a subsidiary of Facebook.

Question 16

1.7.1 Explain
* development stage of the employment cycle

Answer 16

The development stage is the second stage of the employment cycle and centres around the induction and training of employees, This helps the business attain its preferred corporate culture. Continued education of staff ensures that employees have up-to-date knowledge of their evolving industry and promotes improved retention rates and staff satisfaction.

Question 17

1.7.2 Explain
* maintenance stage of the employment cycle

Answer 17

The maintenance stage is the third stage of the employment cycle, though employees do alternate between development and maintenance. Recognition, rewards and distinct career progression pathways are necessary in this stage to support and motivate staff. A positive business culture is crucial in the maintenance stage to minimise staff turnover rates and curtail recruitment and training expenses associated with replacing employees.

Question 18

1.8 Explain the role of
* risk management during expansion

Answer 18

Risk management involves identifying and assessing the risks associated with a business’s choices, with the aim of alleviating or controlling the effect of unacceptable risks. Possible examples include: disturbances to supplies, environmental disasters, tainted market reputation, and amendments to government policy.

Question 19

1.9 Explain the role of
* the intrapreneur in a competitive market

Answer 19

Intrapreneurs possess comparable skills to entrepreneurs, though they are employees of a business rather than the owner and founder, meaning they face less risk but receive lower rewards. The role of intrapreneurs is to introduce innovative ideas, enhance the business’s efficiency and productivity and motivate other employees.

Question 20

1.10 explain the relationship between
­ * employer of choice strategies and the maturity stage in a competitive market

Answer 20

Employer of choice strategies are the staff recruitment and retention strategies required as the competitiveness associated with the maturity stage increases. Businesses hope to attain a competitive advantage over their contenders by retaining their most valuable staff, thereby limiting recruitment expenses for new employees and ensuring that their business continues to function and perform optimally.

Question 21

1.11 explain the relationship between
­ * a diverse workforce and human resources strategic planning in the maturity stage

Answer 21

Workforce diversity can include having employees of varying ages, different religious beliefs, ethnicities, work experience, gender and so on. This concept is linked to strategic planning because workforce diversity is a valuable human resources strategy that can positively influence relations amongst staff, fostering inclusiveness and enhanced teamwork.

Question 22

1.11.1 explain the relationship between
­ * risk management and strategic planning in a competitive market

Answer 22

Risk management is an essential aspect of strategic planning in both competitive markets and more broadly. By looking at the risks and associated ramifications of certain actions, a business can safeguard against suffering avoidable consequences. Therefore, risk management is a valuable facet of strategic planning.

Question 23

1.11.2 explain the relationship between
­ * ­ leadership styles and management strategies required to be competitive

Answer 23

Effective leadership styles and management strategies are both fundamental elements for remaining competitive during the maturity stage of the business life cycle. Leaders must adopt a suitable leadership style which motivates, inspires and guides employees to ensure the business remains competitive. Likewise, compatible management strategies must be implemented to uphold the business’s efficiency and effectiveness in the functional areas of finance, human resources, marketing and operations.

Examples of leadership styles include: authoritative, charismatic, bureaucratic, authentic, transactional, and transformational.

Question 24

1.11.3 explain the interrelationship between
­ * ­ motivation theory, staff retention and employer of choice

Answer 24

The interrelationship between motivation theory, staff retention, and employer of choice is that each of these concepts is connected to employee satisfaction in the workplace.
Motivational theories assist business leaders to understand their employees and to introduce suitable tactics to motivate them, thus enhancing staff retention. Employee retention refers to the capacity of an organisation to retain its staff members. Employer of choice is a recruitment and retention method designed to promote loyalty amongst staff in an increasingly competitive business environment through attractive incentives. For instance, Google is renowned for its staff retention strategies, including free food, the choice to bring pets to work, travel insurance, and health care coverage.