1.5 Growth and Evolution Student Slides.pdf

Unit 1: Introduction to Business 1.5 Growth and Evolution - Internal and External Economies of Scale  What you need to know Internal and External Economies of Scale (AO2) Difference between internal and external growth (AO2) Reasons for businesses to grow (AO3) Reasons f...

Unit 1: Introduction to Business 1.5 Growth and Evolution - Internal and External Economies of Scale  What you need to know Internal and External Economies of Scale (AO2) Difference between internal and external growth (AO2) Reasons for businesses to grow (AO3) Reasons for businesses to stay small (AO3) External Growth Methods: (AO2) - M&As, Takeovers, Joint Ventures, Strategic Alliances and Franchising Unit Links to Key Concepts: - Change is essential for businesses to achieve their desired aims - Creative business planning can lead to organisational success - Ethical business behaviour improves a business’ image as well as customer loyalty - Sustainable business practices can enhance a business’ existence What is Economies of Scale Economies & Diseconomies of Scale Economies vs Diseconomies of Scale Internal Economies of Scale Types of Internal Economies of Scale Types of Internal Economies of Scale (cont) Types of Internal Economies of Scale (cont) Types of Internal Diseconomies of Scale Types of External Economies of Scale Types of External Economies of Scale (cont) Types of External Diseconomies of Scale  Unit 1: Introduction to Business 1.5 Growth and Evolution - Difference between Internal and External growth  What you need to know Internal and External Economies of Scale (AO2) Difference between internal and external growth (AO2) Reasons for businesses to grow (AO3) Reasons for businesses to stay small (AO3) External Growth Methods: (AO2) - M&As, Takeovers, Joint Ventures, Strategic Alliances and Franchising Unit Links to Key Concepts: - Change is essential for businesses to achieve their desired aims - Creative business planning can lead to organisational success - Ethical business behaviour improves a business’ image as well as customer loyalty - Sustainable business practices can enhance a business’ existence  Internal and External Growth Internal Growth: External growth: This occurs when a business This occurs through dealing grows by using its own with outside organisations. capabilities and resources to Such growth usually comes in increase the scale of its the form of alliances or operations and sales revenue. mergers with other firms or This type of growth is often through the acquisition of other referred to as organic growth businesses. This type of growth is known as inorganic growth. Methods of Internal Growth Advantages & Disadvantages of Internal Growth Advantages & Disadvantages of External Growth  Business Management Toolkit - (HL/SL) Descriptive Statistics Descriptive statistics are quantitative tools used in Business Management to summarize and present statistical data in a user-friendly way. The purpose is to enable managers and decision makers to interpret and analyse the data more easily and to support them in making non-biased (rational), objective, evidence-based, and well-informed decisions.  Unit 1: Introduction to Business 1.5 Growth and Evolution - Reasons for Businesses to Grow  What you need to know Internal and External Economies of Scale (AO2) Difference between internal and external growth (AO2) Reasons for businesses to grow (AO3) Reasons for businesses to stay small (AO3) External Growth Methods: (AO2) - M&As, Takeovers, Joint Ventures, Strategic Alliances and Franchising Unit Links to Key Concepts: - Change is essential for businesses to achieve their desired aims - Creative business planning can lead to organisational success - Ethical business behaviour improves a business’ image as well as customer loyalty - Sustainable business practices can enhance a business’ existence Measuring the Size of a Business The size of a business can be measured in several ways: Market share Total sales revenue Size of workforce Profit Capital employed Benefits of being Large… Economies of scale Lower prices Brand recognition Brand reputation Value-added services Greater choice Customer loyalty  Business Management Toolkit - (HL/SL) Ansoff Matrix The Ansoff matrix is a strategic decision-making tool, Market Development: used to devise product and market growth strategies Multinational food giant Nestle expanded into the for an organization. It was developed by Russian Indian pet food industry back in 2018 American Igor Ansoff in his article ‘Strategies for Diversification’, published in the Harvard Business Product Development/Market Development: Review (1957). Essentially, the Ansoff matrix (or Ansoff It is not always easy to know whether a growth growth matrix) shows four generic growth strategies strategy is product development or market that can apply to any business or any industry. development. For example, marketing a new Lynx (deodorant) or LEGO product to females is an example of targeting new customers (i.e. market development) and new products (i.e. product development). Diversification: Diversification involves organisations moving into new markets with new products, e.g. Honda lawnmowers, Lenovo smartwatches or the Golden Arch hotel of McDonald’s in Switzerland. Benefits of being Small… Cost control Loss of control Financial risks Government aid Local monopoly power Personalised services Flexibility Small market size  Unit 1: Introduction to Business 1.5 Growth and Evolution - External Growth Methods  What you need to know Internal and External Economies of Scale (AO2) Difference between internal and external growth (AO2) Reasons for businesses to grow (AO3) Reasons for businesses to stay small (AO3) External Growth Methods: (AO2) - M&As, Takeovers, Joint Ventures, Strategic Alliances and Franchising Unit Links to Key Concepts: - Change is essential for businesses to achieve their desired aims - Creative business planning can lead to organisational success - Ethical business behaviour improves a business’ image as well as customer loyalty - Sustainable business practices can enhance a business’ existence Mergers and Acquisitions Benefits and Drawbacks of M&A  Takeovers Takeovers occur when a company purchases a controlling stake in another company without the permission and agreement of the company or board of directors. They are also known as hostile takeovers. In April 2022, Elon Musk made an offer of US $43 billion to takeover Twitter. This was an offer directed at the firm’s shareholders. If shareholders agreed to the offer, Elon Musk could take over Twitter without the permission and agreement of the company or board of directors.  Unit 1: Introduction to Business 1.5 Growth and Evolution - External Growth Methods  What you need to know Internal and External Economies of Scale (AO2) Difference between internal and external growth (AO2) Reasons for businesses to grow (AO3) Reasons for businesses to stay small (AO3) External Growth Methods: (AO2) - M&As, Takeovers, Joint Ventures, Strategic Alliances and Franchising Unit Links to Key Concepts: - Change is essential for businesses to achieve their desired aims - Creative business planning can lead to organisational success - Ethical business behaviour improves a business’ image as well as customer loyalty - Sustainable business practices can enhance a business’ existence Joint Ventures  Strategic Alliances Strategic alliances occur when two or more businesses cooperate in a business venture for mutual benefit. The firms in the SA share the costs of product development, marketing and operations. However, SA firms remain independent organisations.  Franchises Franchising is a form of business ownership whereby a person or business buys a license to trade using another firm’s name, logos, brands and trademarks. The agreement is between the: Franchisor: the firm selling the license, and the Franchisee: the entrepreneur buying the license Benefits of franchising for franchisors and franchisees Drawbacks of franchising for franchisors and franchisees