A Level Business > Unit 9 > Flashcards

Unit 9 Flashcards

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1
Q

what are economies of scale

A

the cost advantages that a business can exploit by expanding their scale of production

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2
Q

what are the internal economies of scale

A

bulk buying
technical eos
specialisation eos
marketing eos
managerial eos

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3
Q

what are the external economies of scale

A

infrastructure development
suppliers concentration

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4
Q

what is bulk buying

A

purchasing of a large quantity of a product which results in lower price due to its market power

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5
Q

what is technical economies of scale

A

larger firms investing in expensive machinery as they are able to in comparison to smaller businesses

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6
Q

what are the pros and cons of technical eos

A

c - this tech may only be available to larger scale businesses
p - can reduce distribution costs
p - can increase productivity

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7
Q

what is specialsition economies of scale

A

giving workers a narrower range of tasks

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8
Q

what are the pros of specialisation of workforce economies of scale

A

allows worker to become more skilled at one trade and reduced labour costs

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9
Q

what is purchasing economies of scale

A

larger firms getting better deals from suppliers

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10
Q

what is marketing economies of scale

A

when larger businesses spread its advertising and marketing budget over a large output

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11
Q

what is managerial economies of scale

A

when large scale manufacturers employ specialists to supervise production systems, manage marketing systems and oversee human resources

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12
Q

what is infrastructure development

A

spending by the local authority on improving transport networks for local towns

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13
Q

what is suppliers concentration economies of scale

A

relocation of component suppliers and other support businesses close to the main centre of manufacturing are also an external cost saving

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14
Q

what is purchasing economies of scale

A

larger firms getting better deals from suppliers

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15
Q

what is inorganic growth

A

when a business starts off small but has grown rapidly, acquired other companies and borrowed heavily to purchase them

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16
Q

what is organic growth

A

when a business starts off small and grows little by little every day through re investing profits

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17
Q

how can a business grow organically

A

opening new branches
investing in tech or new facilities
increase capacity
develop new products
e.g greggs, lego and aldi all organic businesses

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18
Q

what are the pros of organic growth

A
  • low risk due to less borrowing
  • brand loyalty can build with growth over time
  • less costs as you are managing them over time as profits come in so can control them
  • no interference from CMA
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18
Q

what can a business grow inorganically

A

acquire/ takeover a competitor, supplier or customer
merge with another business
e.g sainsburys and google are both inorganic

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19
Q

what are cons of organic growth

A
  • much slower growth means less competitive
    no opportunity for synergy with another business such as getting their customer base or expertise
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20
Q

what is franchising

A

arises when a franchisor grants license(franchise) to another business(franchisee) to allow it to trade using brand/business format

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21
Q

what are the pros of franchising

A

speeds up growth
less HR costs
less operations costs
Franchisee get USP

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22
Q

what are the cons of franchising

A
  • reduced control which could damage reputation
  • profit sharing
  • cost of recruiting and providing ongoing support to the franchise
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23
Q

what is a merger

A

2 or more business agreeing to become integrated to form one new business

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24
what are the benefits of a merger
can benefit from synergy combined performance is greater than if each business performed individually
25
what is a takeover
the process of one organisation buying another which occurs when one company purchases over 50% of shares takeovers can either be agreed or hostile
26
what is integration
bringing 2 or more businesses together through merger or takeover
27
what is synergy
when two businesses can achieve more when they are brough together rather than operating individually
28
what is a backward vertical takeover
this involves acquiring a business operating earlier in the supply chain e.g retailer buys a wholesaler
29
what is a conglomerate takeover
this involves the combination of firms that are involved in unrelated business activity
30
what is a forward vertical takeoever
this involves acquiring a business further up in the supply chain e.g a vehicle manufacturer buys a car parts distributor
31
what is horizontal growth
when a business in the same industry which operate at the same stage of production process are combined
32
what are some reasons for a takeover (name 5)
to achiever economies of scale to increase market share improvement of product portfolio to acquire talent get supply and distribution channels
33
what are drawbacks of takeovers
risk of significant debts to fund takeover concerns over loss of profits may lower share price loss of key staff members due to redundancy bad timing e.g in economy difficulties in integrating systems
34
what are joint ventures
a form of growth when two or more businesses agree to act collectively to set up a new business venture with all parties contributing equity to fund the set up and purchase of assets
35
what is diseconomies of scale
when a business grows but instead of costs going down they go up
36
why might there be diseconomies of scale
communication problems e.g too many levels and slow decision making co ordination problems e.g issues with departments and groups adapting
37
how can a business overcome issues of diseconomies of scale
analysing organisation design use of IT employee development (appraisal) use of budgets(use it wiser)
38
what is overtrading
this happens when a business expands too quickly without having financial resources to support such quick expansion
39
why might overtrading occur
sales are made on credit and customers take too long to to settle amounts owed growth made by investing in production and operations without revenue being generated
40
what is retrenchemnt
the opposite of growth and mean cutting down or reducing the size of a business with the aim to become more financially stable
41
what are some reasons for retrenchment
changes in the market failed takeover economic downturn improving performance
42
what is innovation
commercially successful explanation of ideas adapting them and making it better
43
what is invention
new ideas that have never been made before
44
what are the two types of innovation
product and process innovation
45
what is process innovation
developing new ways of making or providing a product or service
46
what is product innovation
the creation of new and improved products
47
what are the benefits of product innovation
opportunity to build customer loyalty varied product portfolio can compete against new entries keeps up with tech advancements can set premium price
48
what are the benefits of process innovation
lower labour costs greater efficiency gives convenience greater flexibility enables mass customization
49
what are the 4 ways of becoming innovative
research and development intrapreneurship Kaizen benchmarking
50
what is research and development
investment in scientific research and technological development to identify innovative products and processes
51
what is intrapreneurship
encouraging all employees to think like entrepreneurs to generate ideas
52
what is Kaizen
adopting a philosophy of continuous improvement whilst making small changes to improve quality
53
what is benchmarking
identifying best practise from market leaders and trying best to emulate this to improve business performance
54
what are patents
intellectual property which delays another business copying very hard to acquire
55
what is globalisation
it is the integration of international markets leading to cross border trade of goods across the world
56
what are some impacts of globalisation
- creation of employment opportunities - ability to buy and sell products internationally
57
why has globalisation grown
- better technology - fewer trade barriers - big companies leading the way - new markets - cheaper production - better transport - shared cultures
58
what are the pros of globalisation
- easier to sell products abroad (higher target market=higher revenue=higher investment) - access to cheaper/raw materials and countries can specialise = lower prices - access to cheaper labour - change locations so business closer to supplier
59
what are the cons of globalisation
- UK businesses have increased and domestic consumers may buy abroad - exchange rates will impact sales - risk of becoming unethical - staying in UK has high labour costs = higher costs of production = reduced profit margins
60
what is the attractiveness of international markets
- size of market - economic growth potential - political environment - exchange rates - domestic competition - better infrastructure
61
what are the ways of entering international markets
exporting direct investment alliances licensing
62
what is exporting
selling directly to customers overseas (low risk)
63
what are the pros of exporting
- low investment - using existing systems(website, staff) - direct contact with customers - get entire profit margin
64
what are the cons of exporting
- cost of transportation - lack of local knowledge - exchange rate scan fluctuate - tariffs, trade barriers and quotas can change
65
what is direct investment
setting up new production or facilities overseas
66
what are the pros of direct investment
- avoids trade barriers - full financial returns received - control over quality and customer service
67
what are the cons of direct investment
- high costs of initial investment - high risk - requires way of understanding business - requires understanding of markets and customers
68
what is alliances
cooperative agreement with a joint venture or overseas business
69
what are pros of alliances
- reduces risk of failure - benefit of overseas companies experience and knowledge - sharing of some costs
70
what are the cons of alliances
- setting up legal agreement and contract - potential disagreements over costs and profit sharing - limited return as its shared with partner
71
what is licensing
selling rights for an overseas business to use name and patent overseas
72
what are the pros of licensing
- get source of income - avoids trade barriers - the outsourcing business will have better knowledge = higher sales
73
what are the cons of licensing
- limited income - loss of control over production - potential loss of intellectual property(patent)
74
what is offshoring
the relocation of business activities from a home country to a different international location
75
what is reshoring
involves a business returning production or operations to home country that had previously been moved to an international location
76
what are the reasons for offshoring
- avoid tariffs/quotas - specialism(tech advancements) - lower labour costs - closer to customers - new ideas - less legislation
77
what are the drawbacks of offshoring
- cultural barriers - competition have more knowledge and expertise - economic factors - ethical issues e.g exploitation - loss of control over efficiency and quality - exchange rates fluctuation - rise in inflation and increased labour costs
78
what are the reasons for re shoring
- shorter lead times - greater flexbility - greater quality control - less threat of patent theft - provides a USP(e.g made in England)
79
what is local responsiveness
adapting products, services and operations to meet the needs of specific local market s
80
what is cost reduction
reducing operational and production costs to remain competitive on a global scale
81
what is the context for local responsiveness
McDonalds have adapted to each country they are in e.g India, Japan, Spain, UK
82
what is the context for cost reduction
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