AQA A Level Business 3.9

increasing the size of the business’ operations (i.e. new stores)

downsizing scale of business’s operations (i.e. closing branches)

increase market share

fulfill growth objective

increase shareholder value

increase economies of scale

turn around poor performance

focus on core business

sell off profitable products- leads to better performance

expansion without joining another business

release new products

enter new markets

using new technology

no interference of outside stakeholders

expansion by joining another business

takeovers

mergers

reduced competition

increased market share

6

“growth through creativity”

low staff levels

growth through long working hours

business grows and has to accept that it needs to be managed by someone

"growth through direction”

decisions still made by founder create unmanageable workload

founder

“growth through delegation”

middle managers appointed and empowered

departments make decisions beneficial to them

“growth through coordination and monitoring”

performance related pay is aligned to achievement of wider corporate goals

wasteful and inefficient paperwork

“growth through collaboration”

business begins to move to a matrix-style organisational structure

Businesses struggle to finance expansion

“growth through extra-organisational solutions”

firm stops growing since they’ve run out of ideas

turn to external growth

two or more businesses join through contractual agreement to focus on a particular business transaction or deal

access to new resources

shared risk

business growth without using money

communication issues may occur

differing cultures

different management styles

when a business buys the right to use another business’s name

business which sells the right to use the name and sell their products

franchisor provides support and training to the franchisee

franchisee benefits from national marketing campaigns

opportunity to sell a well known brand name or product

quick expansion

works well for certain business (i.e. easy to replicate production methods)

franchisee must pay fees to the franchisor

franchisee can’t make all decisions about what to sell

brand reputation can be damaged by other franchisees

average costs falling from selling a variety of products instead of one

when a business can reduce unit costs (and price) by making or selling large amounts

large businesses can buy in bulk

using specialist staff to negotiate better deals

large businesses can mass produce

use technology to replace staff on the production line

unit costs increase as the business grows too large

excessive layers of management- lead to poor communication

shortage of skilled staff- pay higher wages

mainly about creating or adding value

new or improved production / delivery methods

new goods / services or improve existing ones

improving or replacing processes - increases efficiency and productivity

adding value - differentiation

developing entirely new and improved products

creates a USP

less competition due to patents

more efficient and cost-effective production process

opportunity cost

costly in research and development stage- a drain on resources

success rate varies- financing waste

Kaizen method

Research and Development

Intrapreneurship

employees in a larger organisation act the same way as entrepreneurs

identifying the best practice

buying a business in the same supply chain

buying a business in the same industry

it creates differentiation

can charge a premium price

increased profit margin

increased total profit

can speed up production

increased productivity

reduced labour costs per unit

increased total profit

can lead to increased market share

high costs with no guarantee on high return

matrix structures allows for collaboration where new ideas will be made

intrapreneurship leads to staff retention

assets that have been created by human ingenuity and creativity

music

engineering

writing

provides legal ownership to original pieces of work

provide legal ownership of new inventions and prevents them from being used or produced by others

gives monopoly power

creates incentives to develop new patentable products

expensive

strong rights may lead to complacency

harder to enter the market

firms forced to be creative

may lead to unethical business practices

industrial espionage

sending employees to rival companies to magpie ideas

fosters product innovation

increased prices

large businesses that operate in a number of different countries

economies of scale

economies of scope

shared expertise

market domination

corporate objective

cultural differences

economic + political stability

respond to cultural diversity

appropriate marketing

Benefits from economies of scale

How a business competes

international

global

transnational

multi-domestic

international

global

Multi-domestic

transnational

high pressure to achieve cost savings through global integration

low pressure to adopt products to meet local differences

sell largely homogenous products

high pressure to respond to local differences

high pressure to achieve cost savings

encourage sharing and ideas between subsidiaries

little pressure to achieve cost savings through global integration

high pressure to adapt products to meet local differences

operate relatively autonomous organisations

little pressure to adapt products

little pressure to achieve cost savings

the more experience a business has the lower its costs due to increased efficiency

Porter’s Generic Strategy - can employ cost leadership strategy

lower prices - increased demand - increased market share

• become a monopoly - barriers to entry - increase their prices

• further economies of scale - lower costs

labour efficiency

labour specialisation

advances in capital

production methods

input mix

experienced workers less likely to make mistakes - less waste

experienced workers become specialised in a specific area. Work at a faster rate.

production capital - increase production rate

IT capital - increase communication flow

over time production methods becoming optimised to suit the business

inputs, such as raw materials, may be optimised to reduce the cost of production

curve looks at historical output (all units ever produced)

economies of scale look at a specific period

economies of scale - as output increases costs fall.

experience curve -as experience increases costs fall

complacency - as a company becomes more experienced they may not want to be innovative or find efficiency gains

as you grow resistance to change may increase