3.9 Definitions

Question 1

Organic growth

Answer 1

Expansion achieved through internal development

Question 2

External growth

Answer 2

Expansion achieved through acquisitions, mergers or partnerships with other companies

Question 3

Technical economies of scale

Answer 3

Increased scale of production with technological and process efficiencies, leading to lower average costs per unit

Question 4

Purchasing economies of scale

Answer 4

Bulk purchasing materials or supplies at volume discounts, leading to lower average costs per unit

Question 5

Marketing economies of scale

Answer 5

Fixed marketing costs being spread out over more units of output leading to lower average costs per unit

Question 6

Managerial economies of scale

Answer 6

Employing specialised managers who improve efficiency, leading to lower average costs per unit

Question 7

Economies of scope

Answer 7

Cost savings resulting from producing a variety of products or services together more efficiently than producing them separately

Question 8

Diseconomies of scale

Answer 8

Increasing average costs per unit as production levels rise beyond a certain point

Question 9

Communication diseconomies

Answer 9

Increased layers in the hierarchy creating longer chains of command, leading to unclear instructions and inefficiencies

Question 10

Motivational diseconomies

Answer 10

Wider spans of control mean workers feel less appreciated, leading to falling productivity

Question 11

Co-ordination diseconomies

Answer 11

Wider spans of control meaning it is harder to ensure all workers are working to the same standard, leading to falling productivity

Question 12

Synergy

Answer 12

When the combined value and performance of two businesses is greater than the sum of the individual parts

Question 13

Overtrading

Answer 13

Expanding operations too rapidly without adequate financial resources or operational capacity, leading to cash flow problems

Question 14

Retrenchment

Answer 14

Purposefully reducing the scale or scope of operations to improve efficiency an profitability following financial difficulties or poor performance

Question 15

Merger

Answer 15

The combination of two or more companies into a single entity with the aim of achieving synergies, expanding market share or increasing competitiveness

Question 16

Hostile takeover

Answer 16

The acquisition of a company by another against the wishes of the former

Question 17

Agreed takeover

Answer 17

One company buying another after mutual agreement

Question 18

Venture

Answer 18

Two or more businesses agreeing to share their resources for mutual benefit

Question 19

Franchising

Answer 19

A new business or individual (franchisee) being granted the right to operate under the brand and business model of an established company (franchisor)

Question 20

Vertical integration

Answer 20

The expansion of a company’s operations into a different stages of the supply chain

Question 21

Horizontal integration

Answer 21

The expansion of a company’s operations into the same stage of the supply chain or industry

Question 22

Congolomerate integration

Answer 22

The diversification strategy of expanding into unrelated industries or businesses to spread risk or capture new opportunities

Question 23

Globalisation

Answer 23

The process of increased interconnectedness and integration of economies, cultures and societies worldwide, facilitated by advances in technology, communication and trade

Question 24

Emerging economy

Answer 24

A developing country with rapidly growing industrialisation, infrastructure and economic potential, characterised by high growth rated and increasing integration into the global economy

Question 25

Export

Answer 25

The sale of goods or services produced in one country to customers or markets in another country

Question 26

Licensing

Answer 26

A company (licensor) granting another (licensee) the right to use its intellectual property in return for fees or royalties

Question 27

Alliances

Answer 27

Collaborative partnerships between companies to achieve common goals, such as sharing resources, technology or market access, while maintaining autonomy and independence

Question 28

Direct investment

Answer 28

The establishment of business operations in a foreign country by a company based in another country

Question 29

Off-shoring

Answer 29

The relocation of business processes, operations or production to another country

Question 30

Re-shoring

Answer 30

The return of business processes, operations or production to the original country

Question 31

Big data

Answer 31

Large volumes of structured and unstructured data collected from various sources and used for analysis and decision-making

Question 32

Data mining

Answer 32

Discovering patterns, trends and insights from large datasets using statistical, mathematical or machine learning techniques