Business unit 9

• What is the definition of retrenchment?

  Reduction of workforce size or resources
• Why is retrenchment considered a way for a business to adapt?

  It helps save costs and adjust to changes
• How might a business exercise cost reduction through retrenchment?

  By reducing its workforce size
• What is one reason a business might retrench to improve efficiency?

  To remove dis economies of scale
• What does focusing on core competencies involve?

  Outsourcing everything else but core activities
• How can retrenchment protect a company's share price?

  By signaling confidence to shareholders
• What impact can retrenchment have on employee morale?

  It can lead to low employee morale
• How might customer perception be affected by retrenchment?

  Customers may become dissatisfied with fewer options
• What could happen to a business's market position after retrenchment?

  It could lead to diminished market share
• Why is it important to identify the root cause of failure before retrenching?

  To determine if retrenchment is the right solution
• In what scenario might retrenchment make sense for a retailer?

  When there are excess physical stores and costs
• Why might retrenchment not make sense for a business struggling with innovation?

  It could hinder the research and development team
• What alternative strategies could a business consider instead of retrenchment?

  Changing marketing segments or distribution channels
• How can HR strategies help a failing business without retrenchment?

  By motivating staff through non-financial methods
• What are the pros and cons of retrenchment for a failing business?

  Pros:

  • Cost reduction
  • Improved efficiency
  • Focus on core competencies
  • Protects share price

  
  

  Cons:

  • Low employee morale
  • Customer dissatisfaction
  • Diminished market share
  • Depends on root cause of failure
• Is retrenchment always essential for a failing business?

  No, it depends on the root cause
• What are the two types of growth in a firm?

  Internal growth and external growth
• What is internal growth also known as?

  Organic growth
• How does a firm achieve internal growth?

  By using its own resources and finances
• What is external growth sometimes referred to as?

  Integration
• What is a key method of achieving external growth?

  Mergers or takeovers
• What are mergers or takeovers also called?

  Acquisitions
• What are the concepts to be aware of regarding growth?

  • Economies of scale
  • Economies of scope
  • Experience curve
  • Synergies
• What are economies of scale?

  Lower average unit cost with increased output
• How can economies of scale benefit a firm?

  By allowing price reductions for competitive edge
• What are economies of scope?

  Using existing resources to produce different products
• What does the experience curve refer to?

  Gaining efficiency with increased production over time
• What are synergies in the context of mergers?

  Combined strengths leading to greater efficiency
• What is diseconomies of scale?

  Increased average cost beyond minimum efficient scale
• What is the minimum efficient scale?

  The output point with lowest average cost
• What problems can arise from growing too fast?

  Coordination, communication, and motivation issues
• What is overtrading?

  Producing too much or opening too many stores
• What financial aspect is crucial for growth?

  Appropriate cash flow management
• What tool can help manage cash flow issues?

  Cash flow forecasts
• What sources of finance might a firm consider for growth?

  Debt or equity financing
• How can operations be impacted by growth?

  Achieving economies of scale and efficiency
• What quality issues may arise from rapid growth?

  Potential lack of quality assurance processes
• What must be considered when growing internationally?

  Different currencies and exchange rates
• How might marketing need to adapt during growth?

  By adjusting the marketing mix and strategies
• What human resource challenges arise from growth?

  Increased recruitment and training costs