Understanding Business Functions
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Questions and Answers

Which market entry strategy is characterized by minimal risk?

  • Market development
  • Diversification
  • Product development
  • Market penetration (correct)
  • What is the primary characteristic of related diversification?

  • Expansion into entirely different industries
  • Catering to new customers within the same industry (correct)
  • Reduction of competition through mergers
  • Launch of entirely new products in new markets
  • Which diversification strategy poses the highest risk?

  • Product development
  • Market development
  • Market penetration
  • Diversification (correct)
  • What does unrelated diversification primarily involve?

    <p>Selling completely new products in untapped markets</p> Signup and view all the answers

    What tool is used for assessing internal strengths and weaknesses as well as external opportunities and threats?

    <p>SWOT analysis</p> Signup and view all the answers

    What is the risk level associated with the market penetration growth strategy?

    <p>Low risk</p> Signup and view all the answers

    Which of the following strategies involves selling existing products in new markets?

    <p>Market development</p> Signup and view all the answers

    What defines the diversification growth strategy?

    <p>Selling new products in new markets</p> Signup and view all the answers

    What is a potential disadvantage of product development as a growth strategy?

    <p>Innovation efforts may fail</p> Signup and view all the answers

    How does diversification benefit a business?

    <p>By spreading risks across a balanced product portfolio</p> Signup and view all the answers

    Which strategy involves taking control of other diverse companies through ownership?

    <p>Holding company</p> Signup and view all the answers

    What type of risk is involved in market development?

    <p>Moderate risk</p> Signup and view all the answers

    Which of the following statements about mergers and acquisitions (M&A) is incorrect?

    <p>M&amp;A carries no financial risks.</p> Signup and view all the answers

    What is a common reason for businesses choosing to stay small?

    <p>Enhanced flexibility</p> Signup and view all the answers

    What does the product development strategy heavily rely on?

    <p>Product extension strategies</p> Signup and view all the answers

    What is a primary advantage of using external growth strategies like mergers and acquisitions?

    <p>Quicker growth than organic methods</p> Signup and view all the answers

    Which of the following is NOT a potential disadvantage of external growth?

    <p>Reduced market share</p> Signup and view all the answers

    In which growth strategy do two firms combine to form a new entity with its own legal identity?

    <p>Merger</p> Signup and view all the answers

    Which external growth strategy allows businesses to spread and reduce risks through diversification?

    <p>Takeover</p> Signup and view all the answers

    What is a significant risk associated with mergers and acquisitions?

    <p>Cultural clashes between organizations</p> Signup and view all the answers

    What describes a strategic alliance between two businesses?

    <p>Voluntary sharing of resources and capabilities</p> Signup and view all the answers

    Why might regulatory barriers be a concern in external growth strategies?

    <p>They may block acquisitions deemed anti-competitive.</p> Signup and view all the answers

    Which of the following is a method of external growth that does NOT require forming a new legal entity?

    <p>Acquisition</p> Signup and view all the answers

    What is an expected outcome of achieving economies of scale through external growth?

    <p>Increased production efficiency</p> Signup and view all the answers

    Which of the following is an example of a joint venture?

    <p>Two companies collaborating on a shared project</p> Signup and view all the answers

    Study Notes

    1.1 What is a Business?

    • Four functional areas exist within an organization: Human Resources (HR), Finance and Accounts, Marketing, and Operations Management.
    • HR handles all staff-related aspects, including recruitment, induction, and training. HR must comply with labor laws in every country in which it operates, including laws related to equality and anti-discrimination.
    • Finance and Accounts are responsible for managing the business's funds, ensuring sufficient funds for daily operations and maintaining accurate records.
    • Marketing involves identifying customer needs and wants to satisfy them, as well as managing the business's money.
    • Operations Management involves the process of creating goods and services, adding value to resources, and using capital for machinery. Land, labor, and other factors help in production.
    • Businesses use resources (land, labor, capital) to produce goods and services that are worth more than the cost of these resources.

    1.2 Private Sector Organisations

    • Private sector organizations are owned and controlled by individuals and businesses. Their aim is to make a profit by selling products and services. Revenue from sales less production costs equals profit
    • Public sector organizations are controlled by the government and aim to provide essential goods and services to the public.
    • Sole traders are individuals who own and are responsible for the success or failure of their business. The owner is the same legal entity as the business. They have unlimited liability which means all their assets could be at risk.
    • Partnerships are unincorporated businesses owned by two or more people. Partners are equally liable for the debts of the business.
    • Privately held companies have limited liability which means that the shareholder's assets are protected up to the amount of their investment.
    • Companies are incorporated businesses owned by shareholders who have limited liability
    • Social enterprises are revenue-generating businesses with social goals. Their goals may include achieving social objectives and earning sufficient profits to operate as sustainable businesses.

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    Description

    This quiz explores the fundamental functional areas of a business, including Human Resources, Finance, Marketing, and Operations Management. You'll learn how each department contributes to overall business success and the importance of resource management in creating value. Test your knowledge of how these functions interact within the private sector.

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