Summary
Summary Section 12: Strategic methods
- Course
- Institution
AQA business A level, section 12, strategic methods A summary of key concepts, ranging from business growth and innovation, to locating abroad and multinationals.
[Show more]
Seller
Follow
katieg1500
Content preview
9 STRATEGIC METHODS Organic growth (internal) DisadvantagesAdvantages - Tension between staff
Business growth - Maintain current management style + culture - Different cultures (diseconomies of scale)
Reasons for growth - Less risky, slower so adapt to growth, easy control - Redundancy costs, ↓ job security
- Increased sales volumes + revenue = profit reinvest - Less disruptive – maintain morale + productivity - CMA merger could restrict comp, finance wasted
- ↑ market share, control prices (competition) - Reinvest profits – premises, oppo cost - Only limited experience so diversification ↓ profit
- Economies of scale + economies of scope - Outperform competitors + ↑ market share - Success not the same abroad
- Diversification (↑ range) to cope market change
- Synergy = more achieved if work together Disadvantages Mergers – shares transferred, synergy (cost saving)
- Long time to adapt to large changes, lose culture Takeovers – more than 50%, controlling interest/stake
Economies of scale (↓ unit cost as become larger) - If market not growing = restricted / new market 1) Hostile, PLC majority share, offer premium price
Large volume of production, machines - Miss out on ambitious growth opportunities 2) Friendly – agreed, survival benefit
Technical efficient, decrease wage costs, ↑ capacity, - Diseconomies of scale – management complicated
capital-intensive, comms - Overtrading risk ↓ working capital = grow too fast Ventures
Purchasing Bulk buying, supplier discount, credit without LT funds, overinvest in assets - Small businesses try meet unmet needs
Managerial Specialist skills, fast, efficient decision - Ltd to PLC = shareholders, short termism, takeover - Joint ventures share resources, ↓ capital needed
- Become monopoly – penalised by CMA - Easy to access international markets
Marketing FC spread, afford more effective channels
- ↑ risk (joint spreads risk)
Large firm afford specialists, production Greiner’s model of growth
Specialisation
adapted, ↑ efficiency repetition Horizontal integration = same industry + stage (↓ comp)
Large firm negotiate larger / cheaper loans, Vertical integration = same industry, diff stage
Financial
access funds (retained profit / shares) Forward (control outlets), backwards (control suppli
Risk bearing Wider product line + diversifying Conglomerate mergers = unrelated firms (product extens
R+D Invest retained profit, processes innovation
Soc welfare Ethical, ↓ turnover, easy to recruit Innovation
Process = new / improved production + delivery
Economies of scope Product = new / improved goods and services
- Cheaper to produce multiple products, X specialise idea, analysis, R+D, value, test marketing, launch
- Use people + infrastructure so only expand produc ↑ success = protection, planning, culture, secrecy, consu
- Benefit from brand loyalty, ↓ prices, comp adv 1. Creative leadership shares ideas, informal, long hrs
Leadership crisis = effectively manage employees Benefits
Experience curve 2. Directional leadership, formal, experienced - Ahead of competition
- More experienced + efficient Autonomy crisis = expertise so want delegation - Expand markets, ↑ market share, economies of scop
- ↓ cost per unit) 3. Delegation + responsibility, decentralised - Charge higher prices if innovative USP
- ↑ total units, cost ↓ at constant Control crisis = coordinated resource use - ↑ reputation, ↑ future product success
- Fewer materials wasted, tech use 4. Coordination, centralised, formal planning - ↑ processes can add value to products
Red tap crisis = staff resent ↓ efficiency
Diseconomies of scale (↑ unit cost as become larger) 5. Collaboration, comms, matrix structure, innov Problems
Lose control, decentral, diff policies, large Growth crisis = seek external growth - Costs time + money (R+D, market research, training)
Coordination 6. Alliances through merger / takeover - Wasting resources on unwanted products (↓ deman
span of control, slow response, ↓ efficienct
Identity crisis = need expertise - ↑ cost = no guaranteed return on investment
Hierarchy, message distort, standardised
Comms - ↓ reputation of product poor quality
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller katieg1500. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.72. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
81311 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now