Edexcel A-Level Economics B 2.1 Business Growth And Competitive Advantage

Front 1

Economies of scale

Back 1

A proportionate saving in costs gained by an increased level of production - as production increases, the average unit cost falls.

Front 2

Internal economies of scale

Back 2

When a business invests in larger-scale production to achieve economies of scale.

Front 3

Technical economies of scale

Back 3

Economies of scale arising in manufacturing, construction and transport - a bigger ocean tanker with double the capacity will not need double the crew.

Front 4

Marketing economies of scale

Back 4

Economies of scale involving advertising and promotion activities - for example, Coca-Cola can use the same advert with different voiceovers in several countries.

Front 5

Managerial economies of scale

Back 5

Focusing on having specialists in management roles - a large business can have specialists in accountancy, human resources and marketing whereas a smaller one might not be able to.

Front 6

Financial economies of scale

Back 6

Arise when a bank sees a larger firm as more secure so charges a lower rate of interest.

Front 7

Bulk-buying economies of scale

Back 7

Because producing more gives economies of scale to the supplier, the customer is able to pay a lower price per unit when buying in bulk.

Front 8

Risk-bearing economies of scale

Back 8

When a larger business attempts to enter a new market, it can bear the risk of it failing more easily - for example, Cadbury's can release new chocolate bars frequently, knowing some will fail.

Front 9

External economies of scale

Back 9

Unit cost reductions shared by a whole industry, rather than a single firm. Common when firms are concentrated in one location.

Front 10

Minimum efficient scale

Back 10

The lowest level of output at which average or unit costs are minimised because the firm can make full use of economies of scale. Businesses smaller than this have a cost disadvantage.

Front 11

Monopsony

Back 11

When a business has power over suppliers because of its market share, for example a large supermarket demanding low prices from a farmer.

Front 12

Brand recognition

Back 12

Measures the percentage of consumers who recognise a specific brand and associate it with product features. A high percentage makes branding a valuable marketing tool.

Front 13

Diseconomies of scale

Back 13

When unit costs increase as a business grows - often because of management and communication issues or costs of co-ordination.

Front 14

Corporate culture

Back 14

The shared values, attitudes, standards and beliefs that characterise members of an organisation and define its nature.

Front 15

Organic growth

Back 15

Expansion of a single business by extending its own operations rather than by merger or takeover. Organic growth is likely to be slower but also more secure.

Front 16

Inorganic growth

Back 16

Expansion by merger or takeover, bringing sudden increases in business size.

Front 17

Horizontal integration

Back 17

When firms with similar products at the same stage of production come together, giving scope for economies of scale and generating extra market share - for example, Japanese car manufacturers Nissan and Honda.

Front 18

Forward vertical integration

Back 18

Adding firms closer to the final consumer in the supply chain - typically a manufacturer beginning to sell directly to consumers.

Front 19

Backward vertical integration

Back 19

Occurs when a business expands towards the supply of raw materials. Examples include Starbucks buying a coffee farm in China and Amazon adding the publishing of books to selling them.

Front 20

Conglomerate integration

Back 20

Takes place when two unrelated businesses merge, generally to diversify and spread the risk of failure.

Front 21

Research and development

Back 21

Work directed towards the innovation, introduction and development of new processes and products.

Front 22

Product innovation

Back 22

Leads to the creation of new goods and services, or improvements to a previous version.

Front 23

Process innovation

Back 23

Changing the way something is produced, normally to reduce average costs.

Front 24

Product life cycle

Back 24

DEVELOPMENT - Research, development and testing all take place.

INTRODUCTION - A product launch marks the onset of sales.

GROWTH - The product becomes known and begins to make profit.

MATURITY - The product is around its peak. Economies of scale are most likely whilst sales are at their highest levels.

DECLINE - Sales fall as preferences change or new alternatives appear. Falling profitability might lead to the product being withdrawn.

Front 25

Extension strategy

Back 25

A way in which a business attempts to prolong the mature phase of a product's life cycle.

Front 26

Asymmetric information

Back 26

Occurs when one party to a transaction knows more than the other party.

Front 27

Viral marketing

Back 27

A method of marketing whereby consumers are encouraged to share information about a company's goods or services via the internet.

Front 28

eCommerce

Back 28

An umbrella term for any online selling.

Front 29

eRetailing

Back 29

Online selling to consumers

Front 30

Micromarketing

Back 30

A customised marketing strategy in which advertising efforts are focused on a small, well defined group of consumers - cookies on the internet achieve this goal.

Front 31

The long tail

Back 31

A proliferation of choices, with increasing ability to match the precise niche market needs of individuals and small groups, reducing the dominance of standard hits.

In the past, high street shops would only stock the best-selling products as they were the most profitable. On the internet, this is not a problem, as retailers can cater to increasingly niche tastes without the problem of storage space.

Front 32

Unique selling points (USPs)

Back 32

Distinctive features that no competing product can match precisely.