Chains of analysis

High quality

-High quality products that exceed customer expectation

-Higher customer satisfaction and increased customer retention

-Develop a brand reputation of being high quality

-Higher sales

Low quality

-Low quality products that don’t meet customer expectations

-Lower customer satisfaction and reduced customer retention 

-Develop a brand reputation of being low quality 

-Lower sales

Higher motivation

-More motivated 

-More commitment 

-Less mistakes

-Less wastage

-Higher efficiency 

-Lower average unit costs

Low motivation

-Less motivation

-Lack of commitment

-Increased mistakes

-More wastage

-Lower efficiency

-Lack of economies of scale due to higher average unit costs

-Less competitiveness

Increased efficiency

-Increased efficiency

-Less resources being used

-Helping cut costs

-Improving profitability

-Allow business to be more price competitive

Decreased efficiency

-Decreased efficiency

-More resources being wasted

-Increasing costs

-Reduced profitability

-Less able to be price competitive

High costs 

-Higher cost per unit 

-Upward pressure on price per unit to maintain profit margins 

-Have to charge higher prices

-Less cost and price competitive 

-Deter customers 

-Lower sales

Lower costs

-Lower cost per unit

-Can reduce prices whilst maintaining profit margins

-More cost and price competitive

-Able to undercut rivals

-Attract more sales

High sales

-Higher sales

-Increased revenues

-Business is more profitable

-Profits can be used to reinvest into the business

-Accelerated business growth

-Increased market share

Lower sales

-Lower sales

-Decreased revenues

-Less profit which could have been used to reinvest into the business

-Slow business growth

-Reduced market share

Reinvesting 

-Improves business products 

-Develop a competitive advantage of higher product quality 

-Higher sales

-Increased market share 

Good reputation

-Improved reputation

-Potential recommendations and word of mouth promotions

-Strengthens bran image

-Attract more customers

-Higher sales

-Increased market share

Damaged reputation

-Tarnished reputation

-Potential poor reviews

-Weakens brand image

-Deter customers

-Lower sales

-Reduced market share

Increased productivity

-Increased productivity

-Higher levels of output produced

-Fixed costs spread over a wider range of output

-Able to benefit from economies of scale

-Lower cost per unit

-More competitive

Decreased productivity  

-Decreased production 

-Fixed costs spread over less output 

-Less able to benefit from economies of scale 

-Higher cost per unit 

-Less cost competitive 

Higher customer satisfaction

-Higher customer satisfaction

-More brand loyalty

-More repeat purchases from customers

-Become less price sensitive

-Able to raise prices

-Higher revenues

Lower customer satisfaction

-Lower customer satisfaction

-Reduced brand loyalty

-Lower customer retention

-Lower sales

Increased innovation

-Increased innovation

-Helps business to remain relevant and not stagnate

-May lead to business establishing a USP

-Develop a competitive advantage

-Enables them to add value to products

-Increased profitability

-Increased market share

Decreased innovation

-Reduced innovation

-Increased risk of business not remaining relevant and stagnating

-Missed opportunity to develop a USP and gain a competitive advantage

-May slow business’ growth

-Lower sales

-Lower market share

Positive work environment 

-Positive work environment 

-Higher employee satisfaction 

-Increased productivity and better quality customer service

-Overall lower absenteeism and labour turnover

Negative work environment  

-Negative work environment

-Lower employee satisfaction

-Decreased productivity and lower quality customer service

-Overall higher absenteeism and labour turnover

Higher competition

-More competition

-More available substitutes

-May lower sales of the business

-Have to become more price competitive

-Lower profit margins

-Require higher sales to reach break even point

Low competition  

-Less competition

-Less substitutes for customers

-Can choose a higher price for products with less resistance from customer due to price inelastic demand

-Increased revenues

-More profitable, profit could be used to reinvest into the business

High customer loyalty

-Higher customer loyalty

-Repeat purchases

-Increased customer retention

-Higher sales volume

Low customer loyalty

-Lower customer loyalty

-Less repeat purchases

-Reduced customer retention

-Lower sales volume

Strong brand image

-Strong brand image

-Higher customer loyalty

-Willing to pay a higher price as demand is more price inelastic

-Increased revenue, higher market share

Weak brand image 

-Weak brand image 

-Reduced customer loyalty 

-Decline in sales

-Lower revenue

-Lower market share

Wasted time 

-Time consuming / Wasted time

-Work not progressing as fast as it could be

-Less productive

-No new projects starting as there is no time to develop new ideas

-Reduced creativity and innovation

Available substitutes

-Larger availability of substitutes

-No USP

-Do not stand out from competitors

-Very little customer loyalty due to standard quality products

Poor working conditions

-Lower staff retention

-Higher absenteeism

-Higher labour turnover

-Inuring costs from potentially advertising new roles

Good working conditions

-Higher staff retention

-Lower absenteeism

-Lower labour turnover

Purchasing Economies of Scale

-If sales increase, there will be an increase in volumes ordered by suppliers.

-Leading to a potential discount from bulk buying 

-Leading to lower average cost of sales/ variable costs 

-Resulting in an increase in gross profit margin

Marketing Economies of Scale

-When businesses have increased sales

-Increased sales volume

-Meaning the fixed costs of marketing (i.e. advertising, market research) can be spread over more units

-Lower unit cost

-More affordable marketing

-Increased advertising

-Greater brand awareness

Financial Economies of Scale

-Business has a history of financial success 

-Lower risk to banks 

-Lower interest rates 

-Lower fixed costs (interest)

-Lower unit fixed costs

Technical economies 

-As businesses grow they begin to make better use of capital/ machinery or have the resources to invest in more

-Increased use of machinery will improve productivity and further increase output 

-Lowering unit cost of producing a product 

-Allowing business to lower selling price 

-Increase profit margin

Risk bearing

-Larger product portfolio

-Spreads risk across multiple products or markets

-Reduced impact of failure

-More stable revenue

-Lower overall business risk