BUSINESS 3.9 - Strategic methods: how to pursue strategies

What is organic growth?

expansion from within a business, like an increase in machinery

What are the benefits of organic growth?

Lower risk, can be financed internally, builds on business strengths, steady business growth

What are the disadvantages of organic growth?

Depends on the growth of the market, slow growth may upset shareholders

What is franchising?

An established company giving another company the right to use its brand for a fee

What are the advantages of franchising?

Running your own business, known brand, easier to raise finance, lower risk method of market entry

What are the disadvantages of franchising?

Expensive, restrictions on selling, franchisor owns the brand

Why does franchising work for the franchisor?

quicker geographical growth, capital investment from franchisees is an important source of growth finance

What is a joint venture?

When two businesses develop a new entity to collaborate on a new project

What are the advantages of a joint venture?

benefit from each other’s resources, both partners can acquire the joint business, reduces risk because both businesses take on risk 

What are the disadvantages of a joint venture?

partner conflict, limited external opportunities

What is a takeover?

A business acquiring control of another business

What are reasons for takeover?

increased market share, access economies of scale, spread risks by diversifying, entering new markets, eliminating competition

What are disadvantages of takeover?

high cost, may upset stakeholders, high failure rate

Why do takeovers fail?

price paid for takeover is too high, incompatibility of two businesses

What are the four types of integration?

Forwards, backwards, horizontal, vertical

What is forwards and vertical integration?

Buying a business further up in the supply chain

What is backwards and vertical integration?

Buying a business lower in the supply chain

What is horizontal integration?

Buying a business at the same stage of the supply chain

What is conglomerate integration?

Where the acquisition has no clear connection to the business buying it.

What are advantages of vertical integration?

greater share of profits, greater insights into customer needs at each stage of supply chain

What is innovation?

The development of a new/ improved idea to increase revenue

What are the different forms of innovation that businesses can use?

Product innovation, process innovation

What is product innovation?

Creating new or improved products

What is process innovation?

Creating new methods to the way a product is delivered