strategic methods 3.9

• Economies of scale

  a proportionate saving in costs gained by an increased level of production.
• Economies of scope

  when unit costs are lower when a business produces a range of products rather than specialise in just one or a few products.
• Diseconomies of scale

  occur when a business grows so large that the costs per unit increase. result of the difficulties of managing a larger workforce.
• Synergy

  happens when the value of two businesses brought together is higher than the sum of the value of the two individual businesses.
• Overtrading

  happens when a business expands too quickly without having the financial resources to support quick expansion. overtrading can lead to business failure.
• Impact of growth on the functional areas of the business

  Increased demand for goods and services which affects the decisions made within each business function.

  Increased motivation for the management

  Increased market share, sales revenue and profit.
• vertical integration

  involves acquiring a business in the same industry but at different stages of the supply chain.
• Forward and backward vertical integration

  Forward vertical = closer to the final consumers of the product eg. a manufacturer buying a retailer.

  Backward vertical = closer to raw materials in the supply chain.
• Horizontal integration

  occurs when a company acquires or mergers with another company in the same industry that is operating at the same level in the value chain.
• Conglomerate integration

  refers to the process by which a company expands its operations into unrelated business areas.
• Intrepreneurship

  starting of new businesses. the ability and readiness to develop, organize and run a business enterprise.
• Benchmarking

  a process that involves measuring the performance of your business against a competitor in the same market.
• Patent

  protecting innovation and intellectual property. the right to be the only user or producer of a specified product or process.
• Copyrights

  protecting innovation and intellectual property. the protection afforded to the creators of work such as writing , music etc.
• The impact of an innovation strategy on the functional areas of the business - benefits and risks

  benefits - improved productivity and reduced costs , better quality , more added value , improved staff retention and building a product range.

  risks - competition , availability of finance.
• Pressures for innovation

  Social changes may increase the demand for innovative and advanced products to replace current products

  Competition may increase a business' focus on innovation as competitors seek to develop new products and services which will attract customers
• Methods of entering international markets

  exporting

  licensing - involves two firms from different countries with the licensee receiving the rights or resources to manufacture in a foreign country.

  alliances - collaborative agreement between firms in different countries.

  direct investment - the purchase or acquisition of a controlling interest in a foreign business by means other than purchasing shares.
• Factors influencing the attractiveness of international markets

  size and growth of the market

  infrastructure

  exchange rates

  levels of disposable income
• Advantages of sourcing overseas

  cost savings

  innovation

  better quality

  higher quality components

  access to specialized skills
• Methods of entering international markets

  joint venture or takeover

  selling via international agents and distributors

  opening an operation overseas

  exporting direct to international customers
• Factors influencing a company to enter international markets

  affordability

  currency

  brand recognition

  tax and employment guidelines
• Internationalization

  the process of designing a product in a way that it may be readily consumed across multiple countries.

  the process involves tailoring a product, service or operation for entry and growth into international markets.
• Examples of digital technology

  e-commerce

  big data

  data mining - process of analysing a large batch of raw data in order to identify patterns and extract useful information.

  enterprise resource planning (ERP) - management of all the information and resources involved in a company's operations by an integrated computer system.
• The impact of digital technology on the functions of a business

  technologies have made elements of businesses much easier and more effective including ; manufacturing , communication , purchasing , sales and advertisement.
• Benefits of digital technology

  increased productivity . improved culture and employee morale , elimination of human error and higher customer satisfaction.
• Off-shoring

  the practice of basing some of a company's processes or services overseas, so they can take advantage of lower costs.
• Re-shoring

  the process of returning production and manufacturing of goods back to the company's original country.