AQA A level business 3.9 2023 with complete solution questions and answers

Define Growth when there is an increase in the size of an organisation's operations Growth occurs in terms of ... x3 Physical assets (i.e. purchasing new premises) Number of employees Increasing product range Reasons for growth X2 Enter into new markets - spread risk Gain economies of scale and reduce costs Define Retrenchment when there is an reduction in the size of an organisation's operations Reasons for retrenchment x2 Focus on core competences - reduces loses or sell off less profitable parts of the business Increase efficiency Types of growth x2 Organic growth External growth Define organic growth when an organisation increases their sales through expanding the scope of their internal operations Organic growth examples include x2 Expanding the current asset base (buying new factories or premises from where to operate) Increasing the product range Organic growth is funded through x3 Retained profit new share issue Loan capital Define external growth when an organisation increases their sales through integrating with other businesses External growth examples x2 Mergers takeovers External growth funded through External sources of finance Organic growth pros x2 abality to maintain culture , management style , brand image and USP Potentially less risk then external growth Organic growth cons x2 Can be slower then external growth Risk of missing out on opportunities in fast growing market Organic growth most appropriate when x2 Business has USP and strong brand image Business has a unique culture External growth pro x2 Gain synergies and economies of scale Reduce level of competition External growth cons x3 •Difficulties of merging two companies - cultures and systems •Impact on motivation - job losses, reorganisation of work and uncertainty •Buying another organisation's liabilities External growth most appropriate when x2 •Business a strong management team able to integrate cultures •Significant economies of scale and scope are achievable Define Economies of scale (EoS) The benefits to a business, in the form of lower average unit costs, from increasing the size of operation Type of economy: Purchasing Bigger business (powerful) supplier = neogatiate discounts/ longer periods of trade credit/reduced average cost/flexible design specification/delivery arrangments Type of economy: technical Bigger organsiation = more advanced/sophisticated technology they are able to afford. = aid in + productivity and - average costs Type of economy: managerial Bigger organisation = pay specialist employees to furfil particular roles = - outsourcing costs/+ efficiency = -average costs Type of economy: Financial Large organisation = + likely able to negotiate favourable interest rates from lenders = - cost of borrowing money Define Diseconomies of scale When a business grows so large that the costs per unit increase. As output rises Types of diseconomy: Communication Bigger organisation = +difficult/cost to communicate with all people + time/effort to ensure everyone has understood communication = + communication costs Type of diseconomy: Coordination Large organisation = communication = more difficult/ensuring everyone is working towards the same goal Needs new managment structures/monitoring systems to execute plans Type of diseconomy: Motivation More diffucult communication/coordination = Organisation potentially more centralised Employees may feel demotivated as a cog in a machine or if they do not see there efforts contribute to the achievement of coporate objectives Define Economies of scope The benefits to a business that arise from producing a range of products Economies of scope occur because x2 •The same production facilities can be used •The same staff can be utilised Economies of scope benefits x2 •Improve brand image and awareness •Spreads risk across a range of markets The experience curve occurs when... An organisation experiences lower average costs as a result of producing a higher volume of output The experience occurs because x2 •Organisations refine production processes over time so that they become more efficient •Worker skill level increases the more units of output that are produced The experience curve implication x2 •Expertise can become a barrier to entry through lowering production costs •Gains are made when production increases and not over time - fast expansion is beneficial The experience curve evaluation points x2 •Could increased size lead to diseconomies of scale and complacency? •Technological developments occur very quickly and it is arguable these lead to greater cost advantages Synergies occur as a result of external growth when the combined strengths of two organisations lead to compounded benefits for the new organisation Types of synergies x2 Revenue synergies Cost synergies Revenue synergies e.g. x2 Opening in new markets Using new distribution channels Cost synergies e.g. x2 Economies of scale (purchasing managerial etc) Intergration of functional activities Synergies evaluation points x2 •Often cost synergies involve reducing the size of the workforce. Valuable skills may be lost, and there could be an impact on motivation •Often an increase in the size of a company can lead to economies of scale - depends on where the economy is producing in relation to the MES Overtrading occurs when ... An organisation lacks the finances to fund their expansion Overtrading = cash flow problem that may occur because x2 •There has been investment in new capacity (fixed assets) that is not yet generating revenues •Spending on new capacity was more expensive than budgeted, or has taken longer than anticipated to complete Define Greiners model of growth Characterises an organisation's growth over time into a series of stages and crisis Stage 1: Creativity includes x2 Communication= informal/spontaneous Good for creativity/adaptability Stage 1: crisis = ? Leadership crisis: As organisation grows = more difficult for leaders to make effective decisions = overworked/stressed Stage 2: Direciton x2 •Leadership roles established - i.e. marketing, finance etc. •Operating decisions are made by management and new products and services continue to be developed Stage 2: Evaluation x2 •Good for consistency and order •Poor for dealing with rapid growth Stage 2: Crisis = ? Autonomy crisis: bigger business = needs strategic direction Management is tied up in day to day running of the business and important decisions need to be made Stage 3: Delegation x2 •Day to day operations delegated - middle managers= leaders can concentrate on strategic direction •Organisation develops in complexity. Communication via formal structures. Stage: Evaluation points •Good as organisation can begin to take a more long term view •Can be chaotic as top managers = distanced from the clients/the functional areas may not = coordinated well Stage 3: Crisis = ? Control crisis: Too many policies/procedures = staff are disimpowered/find their job - inflexible , time consuming to effectively complete Stage 5: Collaboration x2 Dencentralised decision making to junior managers - Implement own system to combine with other functional areas May adapt matrix structure = more flexible to meet demand Stage 5: Evaluation points x2 •Good for re-establishing creativity / improving motivation of empowered employees •However, organisation has reached limits of internal growth capabilities Stage 5: Crisis = ? Growth crisis: Limits of organic growth reached = need for expansion via merger/acquisition Stage 6: Aliance x2 •Organisation needs to look outside itself to find further opportunities for growth through mergers, JVs or outsourcing •Complex structure/reporting systems, with product lines, geographical areas/ conglomerate type systems in place Stage 6: Evaluation points x2 •Good for taking advantage of growth opportunities and developing synergies •Can create a lack of focus on core competences /difficulty identifying the business's corporate culture Stage 6: Crisis Identity crisis: The organisation now = large/complex - Difficult to identify core purpose and meaning of the business = lack of direction/demotivated staff Greinars model of growth Criticisms x2 •A simplistic representation of a complex and nuanced process that is unique to each business •The duration of each phase and the whole model will differ from business to business Impact of growth/retrenchment on finance x2 •Extent to which economies / diseconomies of scale are generated •Sources of finance for growth Impact of growth/retrenchment on marketing x2 •Impact on product portfolio •The need for market research Impact of growth/retrenchment on operations x2 •Impact on capacity and capacity utilisation - close down factories that are operating under capacity •Quality issues Impact of growth/retrenchment on HR •Training requirements •Impact on motivation - closing down factories etc. Define Merger When two or more businesses agree to become integrated to form one business under joint ownership Define takeover When one business gains control over another and becomes the owner, can be achieved by buying 51% of the shares Merger/takeover pros x2 Gain economies of scale To eliminate competition Meger/takeover cons x3 Can be very expensive Incompatability of management styles , structures and culture Suffer diseconomies of scale Define joint venture When two or more businesses create a new subsidiary company of which ownership, and the associated risks and rewards, are shared Joint venture pro x2 Benefit from synergies (market knowledge, design expertise and distribution network) Use the skills. technology and knowledge acquired in the parent company Joint venture cons x2 Can be difficult to combine organisatioanal culture Risk of conflict or changing objectives between parent companies Define Franchise When a business (the franchisor) licences another individual or organisation (the franchisee) to trade using the franchisor's name, branding and product range Define franchisor A business that licences other individuals or organisations to trade under their brand name Franchisor pro x2 Less risky as less requirement to borrow Can exploit economies of scale Franchisor cons x2 Risk of damage to brand as franchisee controls their branch Rapid expansion can be difficult to monitor and manage - impact on standards Define Franchisee An individual or organisation who is licenced to trade under a brand name in exchange for a fee and share of the profits Franchisee pro x2 Lower risk of starting a new business under a recognised brand name and existing business model Consumers are aware of the brand Franchisee cons x2 Lack of economy/ decision making power in relation to many aspects of the business: Product range, sourcing raw materials, branding and marketing Risk of damage to brand through the actions of others Define vertical intergration When an organisation grows through integrating their supply chain: Raw materials (primary sector), manufacture (secondary sector) and retail (tertiary sector) Vectical intergation pro x2 Reduces power of suppliers (poter's 5 forces) and increases certainity in terms of pricing/consistency Suppliers can be tailored to the exact needs of the manfacturers Vertical intergration cons x2 High risk as business is expanding into area outside its core competence Fewer economies of scale able to be exploited because of the expansion is into a different country Define Horizontal Integration Organisation grows through buying another business that operates at the same stage of the production process Horizontal Intergration pros x2 Generate internal economies of scale ,purchasing , managerial , risk beating etc. Economies of scope Horizongtal intergration con x2 Diseconomies of scale - communication , coordination and motivation Employees resistance Define lateral integration When an organisation grows through diversifying into industries related to their existing product portfolio Define conglomerate integration When an organisation grows through diversifying into industries unrelated to their existing product portfolio Conglomerate integration pros x2 Diversifies the company's risk over a range of unrelated markets Brands can develop a loyal following, making customers more willing to try new products Conglomerate integration cons x2 Busineses may lack management expertise in new area Potential damage to brand image Define innovation Process of generating a new idea and putting it into action. This includes: Coming up with a completely new idea and Refining an old idea Define product innovation When changes are made to the business model. I.e. changing the production process/the supply chain/ the organisational structure Pressures to innovate x3 Levels of competition Changing consumer demand Changing technology Innovation pros x2 Differentates an organisation/ creating a USP Motivation for workforce Innovation cons x2 Time consuming Requirements market research Amount of innovation in an organisation depends on x3 Levels/nature of competition skills of workforce Define kaizen Management philosophy that involves the whole workforce in making small, consistent changes to improve the quality of products or processes Kaizen involves x2 Workers are encouraged to put forward ideas for innovation Making small,consistent changes in the production process Kazien pro x2 Improves motivation Small changes require less capital investment Kaizen cons x2 Some workers may resist change Some workers may ignore suggestions,which undermines the whole system Research/development (R&D) The process of scientifically investigating new products and processes R&D process Collection of data / idea generation / intial design / feasibility development / prototype / product testing / final design & launch R&D pro x2 Create of new design improves brand image/USP Source of competitive advantage R&D Cons x2 High cost involved Time consuming Define intrapreneurship The abality to apply entrapreneurial traits/chracteristics in job roles other then running their own business Entreprenuerial skills/attributes include x2 Risk taking creative thinking Ways to encourage intrapreneurship x2 Empowerment of employees embrace & encourage risk taking Intrapreneurship pros x2 Motivation for staff Fosters culture of innovation/creativity Intrapreneurship cons x2 Possible inconsistency across organisation Decision making lasts longer Define Benchmarking The process of identifying high level performance and comparing that to the actual results a company achieves in order to improve outcomes Benchmarking process Identifying elite performance / analysing the results achieved nd strategies used to achieve them/ comparing actual results against elite performance targets/Brainstorming ways to improve results nd implementing new stratigies to improve performance Types of benchmarking x4 Strategic performance functional internal Define strategic benchmarking Identifying the long term strategies leading to elite performance Define performance benchmarking Identifying the specific results achieved by competitiors Define Functional benchmarking Identifying the key strategies employed in successful departments Define internal benchmarking Comparing performance across branches/departments benchmarking pro x2 Encourage investigation into elite performance Encourage critical thinking & self reflection Benchmarking cons x2 May encourage copying rather then innovation/thinking Time consuming Define intellectual property The ideas and concepts generated by an organisation Intellectual property includes x3 New products & product innovation Creative ideas (marking ideas , logos and brand name) Artistic creations (Books , music and images) Forms of protection x3 Patent Trademark copyright Define patent Licence granted by goverment that gives the holder the exclusive right to produce a particular product/ undertake a specific process What does a patent protect? Unique features of a design for a particular product or process How does a patent work? Investor of an idea needs to submit a plan demonstrating its unique features. A patent allows the holder a monopoly over the use or production of that idea. It can be sold , rented or licenced Define trademark A logo, word or symbol that is used to represent a band What does a trademark protect It is unique to a company/ the design/brand name that cannot be used by others How does a trademark work Owner of the brand needs to apply for an trademark to be registered at the uk intellectual property office. Once it has been registered, no one can use the design Define copyright Form of legal protection that prevents others from copying the artistic works of writeres,musicians and artists What does copyright protect Artistic work including: Music, literature and performances How does copyright work Material containing piece of music , art or literature the material is automatically protected with no need to apply. Copyright work can be copied or adapted for a fee Protecting intellectual property pros x2 Encourages businesses to innote as original ideas will be more difficult to copy Patents lead to a degree of monopoly power. Seen as reward for risk taking Protecting intellectual property cons x2 Patenting process is complex and time consuming Monopolies are uncompetitive and exploit customers - ethical argument Define Internationalisation The process of a business developing operations outside of the country in which it is headquartered Internationalisation includes x2 •Exporting to overseas markets •Manufacturing abroad Factors Influencing the Attractiveness of International Markets x3 Size of a potential market Levels of competition External environment (PESTLE) Reasons for internationalisation x2 •Benefit from synergies •Favourable environment (PESTLE) Define offshoring The relocation of business activities from the home country to a different international location What does offshoring involve This could involve moving in - house functions (i.e. a call centre / a factory) overseas OR involve outsourcing to an overseas supplier Offshoring pro x2 To access better skilled labour & higher quality supply To take advantage of free trade areas/ avoid protectionism Offshoring cons x2 Long lead time for suppliers & risks of poorer quality (customer service effects) Additional management cost (time,travel) Define re-shoring The relocation of business activities to an organisation's home country, after those activities have been conducted off - shore Factors driving trend for re-shoring x3 Increase flexibility i.e. it is easier to respond to changes in demand shorter lead times lower transport costs Influences on buying , selling and producing abroad x2 Cultural similarities/ differences Benefit from economies of scale/ experience curve Define Bartlett and Ghoshal A model outlining the strategies for operating a multinational company based on the pressure for local responsiveness and the pressure for managing costs What is Pressure for local responsiveness To what extent does the product need to be customised to adapt to local tastes What is Pressure to reduce costs (global integration) To what extent does the MNC need to exploit their economies of scale in order to gain a competitive advantage? Pressures for local responsiveness is high when x2 •When there are large cultural differences between the countries an MNC operates in •Differences in infrastructure, business operations and distribution networks between countries Pressure to reduce costs are high when x2 •When products are not differentiated, and price is the USP •In highly competitive markets Bartlett and Ghoshal: Global strategy Economies of scale exploited on a global scale products can be standardised , for commodites , industrial goods and low price commercial goods Centralised decision making/coordination of branches from HQ in order to intergrate production = exploit fully EOS Bartlett and Ghoshal: Transnational strategy Adapt product = meet local needs, whilst benefiting from EOS decentralised decision making e.g. R&D/marketing = then shared globally - known as "global learning" Need mixture - centralised/decentralised decision making/coordination of seperate parts Bartlett and Ghoshal: International strategy Demand for product (similar) - MNC's home market , while there is little pressure for lowering production costs Product development/R&D = centralised, other decisions may = decentralised Local branches implement centraly made decisions Bartlett and Ghoshal: multi - demoestic strategy Different markets = high demand for products to = adapted but little pressure to exploit global EOS Marketing/product development/R&D - decisions decentralised - lots of seperate businesses operating independently essentially Local branches have expertise = make own decisions Define digital technology The data that is generated and stored in binary form, / the hardware that is used to store and transmit such data Digital technology includes x2 Online communications (emails etc.) computer networks Internal pressures to adopt digital technology x2 Improve organisational efficiency/productivity Improve effectiveness of marketing