3.9 Strategic methods: how to pursue strategies

give examples of organic growth

increasing sales

new assets

new employees

new markets

give examples of external growth

mergers and acquisitions

joint ventures

franchising

whats horizontal integration

when two similar businesses merge

whats lateral integration

when two related businesses merge

what is vertical integration

when two businesses at different stages of production merge (restaurant merging with a farm)

what is conglomerate intergation

when two businesses in very different markets merge

what is economies of scope

when cost advantages are gained by a business diversifying their product range (eg. coke original making diet coke so money is saved using similar resources but gaining increased revenue from new market)

what is a synergy

when a new integrated business is greater then its original parts

what is overtrading

when a business expands its operations too quickly without sufficient resources, leading to cash flow problems and operational inefficiencies

what is retrenchment

when a business reduces

eg output/capacity, enforcing job losses, product/market withdrawal, scaling back investments

what can drive retrenchment

if costs are too high

low ROCE

high gearing

loss of market share

economic downturn

change of ownership

what are the two types of innovation

product and process innovation

what is offshoring

relocating business activities from the home country to an international location

what is reshoring

reversing offshoring

bringing business activities back from overseas to home country

give examples of the key pressures on businesses to adopt digital tech

to serve existing customers better

to reach new customers easier

to offer new ways of delivery/services

reduce costs by integrating tech into operations

keeping up with competitors

ability to access, analyse and action data providing insights into customer needs and business performance

what is data mining

the process of analysing data from different perspectives and summarising it into useful info

what are some benefits of data mining

ability to identify previously unforeseen relationships between business data sets

better able to predict future trends and behaviours

generate business actions built on data insights

what is big data

collecting large data sets from traditional and digital sources

what is licensing

allowing another company to use the company’s intellectual property

(eg Disney licensing its characters to a toy/clothes company)

what is franchising

when a company (franchisor) allows another person (the franchisee) to operate a business using its brand and operating model

what is a joint venture

when a business partners with a local business in a foreign market to share resources, risks and profits

what is a patent

giving an inventor exclusive right to use/make/sell an invention for a certain period (usually 20yrs)

what is copyright

an exclusive right automatically granted when a work is created and fixed in tangible medium

(eg books, music, software)

what is intrapeneurship/an intrepeneur

like an entrepreneur for an existing company

they develop new ideas/products/processed for the company who takes responsibility for their success

They’re an entity of the company so the public gives the company gratitude while they may receive internal gratitude

what is benchmarking

the process of comparing business processes and performance against industry bests

what is internal benchmarking

comparing practises within different departments/units within the same organisation

what is competitive benchmarking

comparing a company’s processes/performance against their direct competitors

what is functional benchmarking

comparing a company’s processes/performance against others that are not in a similar industry/function