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129 Cards in this Set
- Front
- Back
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How is business size usually measured? |
Revenue
Profit
Market share
Number of employees |
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Why is it good to be a large business? |
- benefit from economies of scale so low unit cost - have a range of products/ service to sell to consumers and can cope with market change |
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What are the different type of economies of scale? |
Technical economies of scale relate to production and its method is large volume is efficient. Greater machinery reduce cost. Managerial is where manager with special skills employed to manage specific department so work done quicker and efficient. Purchasing economies of scale is to do with discount on purchase so big firm can negotiate with suppliers to get discount like bulk order. Marketing cost are fixed so large out put could spread the cost. |
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What are examples of external economies of scale? |
-like if near the supplier mean easier to negotiate reduce price charged whilst increasing quality
- skillful labour - having large number of suppliers to choose from |
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What does the experience curve show? |
it shows that as business get more experience they become more efficient and this means that as the number unit increase the cost reduce as business is more efficient. |
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What is economies of scope? |
Where producing a variety of goods is cheaper than specialising in one. Like its cheaper for one business to produce many product than many businesses producing one product each. |
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When does economies of scope arise? |
When a business producing a variety of product instead of specialising in one. |
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Who would be good at producing economies of scope? |
-Businesses that already have people and infrastructure will be efficient in producing efficient product. -Large business can also expand production department with out the need to expand other department. |
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What is dis-economies of scale? |
Where the unit of cost increase as the production increases. |
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Why do dis-economies of scale occur? |
- large firm harder to manage compare to small ones - sometimes poor coordination result in less efficient - communication is harder is big firm as its slower and difficult to get the message to the right people quickly. - hard to motivate people in large firm as there is so many of them. |
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What is retrenchment? |
When businesses become smaller to remain profitable |
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Why does retrenchment occur? |
-Due to diseconomies of scale and decline in the market. -Recession or competitor outplayed the business |
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What happens to business when its in retrenchment phase? |
- Cut jobs as when sales decrease the cost of wage need to be decreased - reducing output if there is less unit sold - withdraw from the market if its less profitable - Demerging (split up the business) so its easier to manage and control what happens to the business. |
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What is organic growth? |
When a business grows within the business like sell more product or make new product to increase market share. |
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What are advantage of organic growth? |
-Able to finance its growth (increase capacity, employ more staff) - easier to grow organically when market that the business is in is also growing quickly. |
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What are the disadvantage of organic growth? |
- the growth is slower and more gradual than external growth |
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What are the advantages of organic growth compare to external growth? |
- maintain its current management style - less risk as the expansion is based on what the business is good at - easier to manage internal growth and control how much to grow by - less disruptive changes so workers moral and productivity is always high. |
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What are the disadvantages of organic growth compared to external growth? |
- take longer to grow internally and even longer to adapt to market changes - market size isn't affected by organic growth so if market isn't growing then its hard to sell product to new market - there might miss of opportunities if businesses only grow internally. |
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Why does growing in size bring problems? |
-Growing companies find it harder to manage cash flow as they try to invest in assets and infrastructure whilst maintaining day to day expenses. - fast growth could increase risk of over trading as increase in demand mean more raw materiel need to be purchased so reduce in working capital which used to pay bills. as company grow it might go from private to public limited company so it get more complicated as shareholders have their input as well and once the company is PLC easier to take over. |
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Why some businesses may restrict growth or retrench? |
- to maintain the culture of the small business - so the business may not become complicated - growth means business need other type of finance which may make things complicated. |
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What is Greiners Model of growth? |
It shows each phase of growth over time. |
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How does Greiners Growth model looks? |
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What is phase 1 in Greiners model of growth? |
Creativity to leadership crises
Businesses are creative when just started and once size expand mean need strong leadership to give direction. |
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What is phase 2 in Greiners growth model? |
Direction to Autonomy Crises
Leaders set up a formal structure with roles and once workers gain experience they want more input decision and as business get big harder to manage so more autonomy through the delegation. |
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What is phase 3 in Greiners Growth model? |
Delegation to control crises
When more power and responsibility is given to middle managers mean the structure becomes decentralized and therefore leader may want to regain control so make best use of resources. |
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What is phase 4 in Greiners model of growth? |
Coordination to Red tape crisis
Control regained by senior manager and certain decisions become centralized
New procedures done to coordinate different areas
On the other hand may have more procedures which decrease efficiency as due to waiting on decisions to be made. |
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What is phase 5 in Greiners model of growth? |
Collaboration to growth crisis
To continue to growth business may collaborate between departments so more focus on communication.
The company might struggle to grow internally and may have to grow externally |
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What is franchising? |
Where an agreement is done to allow new businesses to use other business ideas,name or reputation to establish their business. |
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What are benefits of being a franchisor? |
Allow to grow quickly as most cost and risk taken by the franchisee |
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What are drawbacks of being a franchisor? |
Risk of ruining the reputation of the brand
This affect profit and market share of the business |
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What is merger? |
When two companies join together to form one company. |
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What's another term for takeover? |
Acquisitions and its when one business buy enough share so more than 50% of total shares |
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What is Geographic market extension merger? |
Between firm in same industry but compete in different geographic markets |
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Why would businesses want to emerge with other businesses through external growth methods? |
- To diversify and gain experience from business already in business
- To reduce amount of competition
- To benefit from economies of scale and economies of scope |
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What are the risk of external growth? |
- Part of new organization might need to be sold off which reduce profit.
-Joint venture could cause conflict as the business may have different objectives.
- When business buys off another business it has to take care of liabilities like compensation claims made. |
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What is ventures? |
Small businesses or project set up by existing business in hope of profit |
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What happens in joint venture? |
Business share resources but no change in owner ship so when terminated profit shared and business kept separate |
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What benefit of joint venture? |
Good way to set up new business when you don't have capital
Also good way to access markets in different countries |
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What is horizontal integration? |
When firm combines with another firm in same industry at same stage of production process like two supliers. |
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What is vertical integration? |
When firm combines with another firm in same industry but different stage of process like retailer taking over a manufacturer. |
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What is forward vertical integration? |
When business joins with another that is further in production process like manufacturer merge with outlet that sell their product. |
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What is backward vertical integration? |
When a business combine with another at an earlier stage of production process like retailer taking over their suppliers to control production. |
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What is conglomerate mergers? |
Where merge occur between unrelated firms and they aren't competitors of each other. |
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What is pure conglomerate mergers? |
Between totally unrelated firms |
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What's another term for takeover? |
Acquisitions and its when one business buy enough share so more than 50% of total shares |
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What is Geographic market extension merger? |
Between firm in same industry but compete in different geographic markets |
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Why would businesses want to emerge with other businesses through external growth methods? |
- To diversify and gain experience from business already in business
- To reduce amount of competition
- To benefit from economies of scale and economies of scope |
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What are the risk of external growth? |
- Part of new organization might need to be sold off which reduce profit.
-Joint venture could cause conflict as the business may have different objectives.
- When business buys off another business it has to take care of liabilities like compensation claims made. |
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What is production innovation? |
Making new goods or services or improving existing ones |
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What is ventures? |
Small businesses or project set up by existing business in hope of profit |
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What happens in joint venture? |
Business share resources but no change in owner ship so when terminated profit shared and business kept separate |
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What benefit of joint venture? |
Good way to set up new business when you don't have capital
Also good way to access markets in different countries |
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What is horizontal integration? |
When firm combines with another firm in same industry at same stage of production process like two supliers. |
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What is vertical integration? |
When firm combines with another firm in same industry but different stage of process like retailer taking over a manufacturer. |
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What is forward vertical integration? |
When business joins with another that is further in production process like manufacturer merge with outlet that sell their product. |
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What is backward vertical integration? |
When a business combine with another at an earlier stage of production process like retailer taking over their suppliers to control production. |
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What is conglomerate mergers? |
Where merge occur between unrelated firms and they aren't competitors of each other. |
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What is pure conglomerate mergers? |
Between totally unrelated firms |
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What's another term for takeover? |
Acquisitions and its when one business buy enough share so more than 50% of total shares |
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What is Geographic market extension merger? |
Between firm in same industry but compete in different geographic markets |
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Why would businesses want to emerge with other businesses through external growth methods? |
- To diversify and gain experience from business already in business
- To reduce amount of competition
- To benefit from economies of scale and economies of scope |
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What are the risk of external growth? |
- Part of new organization might need to be sold off which reduce profit.
-Joint venture could cause conflict as the business may have different objectives.
- When business buys off another business it has to take care of liabilities like compensation claims made. |
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What is production innovation? |
Making new goods or services or improving existing ones |
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What is process innovation? |
Putting in place new or improved production and delivery method that are more efficient. |
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What is ventures? |
Small businesses or project set up by existing business in hope of profit |
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What happens in joint venture? |
Business share resources but no change in owner ship so when terminated profit shared and business kept separate |
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What benefit of joint venture? |
Good way to set up new business when you don't have capital
Also good way to access markets in different countries |
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What is horizontal integration? |
When firm combines with another firm in same industry at same stage of production process like two supliers. |
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What is vertical integration? |
When firm combines with another firm in same industry but different stage of process like retailer taking over a manufacturer. |
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What is forward vertical integration? |
When business joins with another that is further in production process like manufacturer merge with outlet that sell their product. |
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What is backward vertical integration? |
When a business combine with another at an earlier stage of production process like retailer taking over their suppliers to control production. |
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What is conglomerate mergers? |
Where merge occur between unrelated firms and they aren't competitors of each other. |
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What is pure conglomerate mergers? |
Between totally unrelated firms |
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What are benefit of innovation? |
-Charge higher price
-Good for firm reputation and bring in interest
- Businesses with lots of innovative product can take advantage of economies of scope like different markets. |
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How does innovation affect the finance of the firm? |
Research and development for product is expensive so might need extra working capital. |
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How does innovation affect the finance of the firm? |
Research and development for product is expensive so might need extra working capital. |
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How does innovation affect the Operations? |
Innovation in production method mean operation department has to set aside budget to spend on expensive machinery. |
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How does innovation affect Marketing? |
Amount of market research increased when researching new ideas but risk and cost is still high. |
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How does innovation affect Human resources? |
Innovation could mean change in staff needed and HR need to ensure that business has the right attitude for the innovation like encourage employees to take risk if they are scared. |
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What are the six stages for idea to launch? |
1) Idea : where business comes up with an ideas
2) Analysis and screening : Business needs to see if product can be produced and make profit
3)Development: R&D department develop working prototype so that they could test it and make functional design.
4) Value Analysis : make product for good value for money so balancing features and appearance of product with costs.
5) Testing marketing : sell product sometime in limited geographical area and analyses consumer feedback
6) Launch: successful launch requires enough stock to be distributed across market and also need of effective promo campaign to persuade them to buy it |
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What is the Kaizen approach? |
Where the employees are encouraged to improve the way they work and process they use all the time. |
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What are the advantages of Kaizen approach? |
- Give wokrers some control in decision making and this creats an working environment in which it can thrive innovation - Using Kaizen means not a lot of time is spent and money on research so helps with becoming more efficient. - Kaizen mindset gets workers to make small changes to their own job rather than big changes to the whole process. |
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What is entrepreneurs? |
When employees within the business solve problems by coming up with new ideas |
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What is advantages of entrepreneurs? |
- take risk and try different ideas so allow the firm be more efficient in the long term - entrepreneurship is done along side the regular role so the company isn't wasting money on the employee |
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What is benchmarking? |
When you learn from other businesses |
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What are the advantages of bench marking? |
- can innovate new ideas for the firm - tend to motivate staff - allow early warnings to business about technology or methods that may allow its competitors to compete. |
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What disadvantages of bench marking? |
- wont always lead directly to new products and competitors product may be covered by patent or copyright - processes cant be transferred between different companies culture like what works best for one may not be the same for another business. |
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What is patent? |
Is a way of registering and protecting a new innovation so competitors cant copy your product. |
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What are the benefit of patent? |
- no one can copy unless you give the licence to and you could charge for the licence - allow to keep unique features of their product - dont have to worry about competitors copying as long as the patent lasts. |
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What is trademarks? |
Trademark allows businesses to protect logos, slogan etc |
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What is copyright? |
Its a protection for written work and musics and illegal to reproduce the work with out oweners permission. |
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What are the benefit of international markets? |
- business can increase hteir market size by selling existing product to new markets - business can extend product life cycle by laucnhing to new countries when product reach maturity like cars - reduce cos of production by getting raw material for cheap from other countries - in developing countries there will low wage rates - businesses can escape recession |
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How does the size of market affect the attractiveness of international market? |
- countries with large population and developing market like China have a bigger chance of market growing. -the wealth of market also affect the size of the potential market in the future. - the availability of technology affect the size of market. |
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How does Political and Economic factor affect the attractiveness of international market? |
- business entering international market have to take into consideration of the law in that country - also consider the political control over trading with the tariff and quota. -fluctuation in exchange rate make cost of international trade unpredictable so hard to forecast revenue. |
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How does Cultural,Ethical and Environment factors affect the attractiveness of international market? |
- business find it easier to trade with countries that share similar cultures and language - cheap labour may attract some businesses but have to be sure that they don't take advantage of the workers. - business have reconsider strategies to not affect the environment. - countries will less restriction will be appealing to most business to trade with. |
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What is a method of entering international market? |
Importing and exporting: - can easily enter international market by selling and buying from companies in different countries. - business importing will get greater variety of goods for cheap price - businesses exporting will benefit from increase market size. |
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What is a method of entering international market? |
Licensing: - business can get foreign firm to produce their good under license. - so the business could benefit from the infrastructure already available. |
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What is a method of entering international market? |
Alliances: - businesses can join similar companies abraod to combine knowledge of product that are already successful - Alliance can spread cost and risk so businesses can over come barriers - only drawback is that business may lose control |
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What is a method of entering international market? |
Direct investment: - when business take over or merges with a business in different countries - main benefit is it allows business to enter markets quickly and have instant share of the market - also reduce risk of failure as it get help from the experience of market with the business its joining. |
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What is a benefit of producing abroad? |
Locating abroad can reduce cost: pay foreign workers lower wages than UK workers - cost of land and offices are also cheap to purchase or attain. |
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What is a benefit of producing abroad? |
Way of targeting new international market locating abroad: - locate firm close to overseas market makes it easier to spot trends - absorb more knowledge so less chance of expensive marketing error. - make distribution of product much easier and decrease distribution cost. |
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What is a benefit of producing abroad? |
Locating abroad helps companies avoid trade barriers: - some countries create barrier to protect companies from foreign competition, like taxes and restrictions - creating barriers restriction internal companies from being more efficient so foreign companies will be more efficient. |
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What is a benefit of producing abroad? |
Improved transportation and communication made trading abroad easier: - price and availability of air travel makes it easier to travel overseas - countries with emerging market are investing heavily on the infrastructure. - technology also helped businesses operate over seas through communicating with emails or video conferencing. |
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What does offshoring mean? |
Moving part of business to cheaper coutnries |
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What is re-oshoring? |
Where business move department back to its country of origin. |
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Why do business go through re-shoring? |
- reaction to changes in customer attitude - customers see oversea business activities as not ethically good as workers are paid less so business image is affected - also re-shoring allow business to improve quality and process of manufacturing as easier to monitor and control what happens in the business. - distribution is cheaper and more efficient as it don't need to shipped all over to world. |
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How can India offer benefits to specific departments? |
-India specialises in communication and IT services so can offer competitive pricing and suitably trained staff. so business may chose to move customer service department to India |
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How can China and Brazil offer benefit to specific departments? |
-China and Brazil have lots of cheap and skilled labour so business would want to move manufacturing department to these countries. -As the production cost is low but also low quality as concentration is toward only volume not value. |
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How can China offer benefit to specific departments? |
China attract lots of Research and Development department to relocate close to manufacturing department and take advantage of skilled low cost labour and infrastructure. |
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How can Philippinesoffer benefit to specific departments? |
Philippines have lots of university young graduate that have strong work ethics and digital infrastructure -So some business move their IT department to Philippines to benefit from the people and technology. |
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What are non financial benefit of locating abroad? |
-Help create jobs in that country - which increase the peoples income and standard of living -Pay tax to the government and host countries like build roads and factories |
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What are non financial cost of locating abroad? |
- loss of jobs and investment in original countries - negative impact on countries the business is moving to like taking advantage of the workers if not protected by employment law. - also rise in pollution |
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What is Bartlett and Ghoshals international business strategies? |
The Bartlett & Ghoshal Model indicates the strategic options for businesses wanting to manage their international operations based on two pressures: local responsiveness & global integration. |
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How does the Bartlettt and Ghoshal model look. |
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What does international strategy mean in Bartlett and Ghoshal model? |
International strategy: - demand of market in other country is the same to the home market and pressure for local is low - so if pressure to reduce cost through global is low then international strategy is adopted. - business structure is centralised so most research, big decision and development done in home office, |
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What does Multidomestic strategy mean in Bartlett and Ghoshal model? |
-When demand of different market are very different and there is little pressure on reducing cost through global coordination. - business structure becomes decentralised and business operate as if lots of independent companies and most decision are made locally to meet local needs - different branches will work and look differently. |
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What does Global strategymean in Bartlett and Ghoshal model? |
-Global strategy used when demand of different markets are similar and global coordination of business could reduce cost. - Business structure is centralised so it will coordinate coordination across countries to take advantage of economies of scale |
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What does Transnational Strategymean in Bartlett and Ghoshal model? |
When pressure to reduce cost and meet local needs is high - its the concept of developing ideas locally and sharing them globally in order to benefit the whole business - business structured is a mixture between centralised and decentralised where responsibilities passed down to each branch based on their experience and capabilities. |
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How would the finance department change when business becomes multinational? |
- if finance remains centralised then staff have to adapt to working with different currencies, for the business to have a healthy cash flow -trade laws limit the amount of money multinationals can take out of a country - have to understand the tax law in different countries to provide analysis of expansion opportunities |
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How would the marketing department change when business becomes multinational? |
- product has to be adapted to meet the needs of local markets. - different strategies used to promote their product - if product standardised the promotional message may have to adapt to appeal to different markets. |
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How would the operation department change when businesses become multinational? |
- if the product is standardised then the different manufacturing process have to work in the same way using same material and machinery - if product being adapted for different market then its less important for manufacturers to coordinate as its more important for them to run efficiently alone. |
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How would the IT department change when businesses become multinational? |
- IT function will be carried out to manage day to day IT problem that are specific to the branch -is business want to adapt to the market then IT need to create and manage different websites. |
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Whats the advantages of digital technology? |
-Research and development department can use up to date digital technology in new product which can revolutionise the product and make it better. - digital technology offers small upgrades to existing product to keep business ahead of its competitors like smart phone upgraded with better camera. |
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Whats the disadvantages of digital technology? |
- very expensive to develop new product based on new technology like if the product don't make it in the market then the money is wasted. - new technology haunt been tested so there is a greater risk of failure as not been done before. -problem with new technology can be had to fix so customers may get frustrated if things don't go as they want it to. |
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How could digital technology help make production more efficient? |
- new technology mean that there could be changes made in the way the product is produced. which lead to better quality and efficiency - can be profitable to the business as the productivity of the business may increase which increase volume and value of sales. |
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What are the drawbacks of using digital technology with the production? |
- take long time to apply new technology to process - staff may need to be trained so efficiency will fall in the short term - also it may be hard for the employees to change |
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How does digital technology give businesses new opportunities? |
- result in e-commerce becoming their primary way for businesses to trade goods and services - e-commerce has given business the access to international markets as businesses can translate their website and world wide deliveries made - manufacturer can sell their product direct to consumers through online market or website - business can deal with customer complaint and improve customer satisfaction |
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What is enterprise resource planning (ERP)? |
Is a business management software that allows business to monitor activities in every department through collection of data. |
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What are the advantages of enterprise resource planning (ERP)? |
- Help HR department to track work rates of staff see who is working hard and well - finance may use previous infrastructure changes for future planning - help marketing department to keep track of how well promotional product are selling -also used to track stock level and productivity |
