Strategic methods
- Created by: emilyhuffordx
- Created on: 31-12-17 11:26
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- Strategic Methods
- Business Growth
- Larger Businesses v Smaller Businesses
- Economies of scale
- Technical - Large businesses can afford to buy better, more advanced machinery
- Managerial - Large businesses can employ managers with specialist skills
- Marketing - A large business can afford more effective forms of advertising
- Purchasing - Big businesses can negotiate discounts when buying supplies in large quantities
- Diseconomies of scale
- Communication is harder and less efficient in a larger business
- Harder to motivate - People don't feel as if they belong
- Poor coordination
- The experience curve
- Workers get practice and experience at making the products, they become more productive
- As efficiency increases as total units produced increases
- Workers develop better ways to make the product, including wasting fewer materials, taking less time and becoming better at using technology and machines
- Economies of scope
- Cheaper to produce many products than it is for many businesses to produce one product each
- A business that already has people and infrastructure in place will be more efficient at producing an additional product
- Allows a business to charge lower prices, and therefore, be more competitive
- Retrenchment
- May be necessary for a business to remain profitable
- Cutting jobs, reducing output, withdrawing from markets and demerging
- Effect on workers depends on how quickly retrenchment is completed
- Economies of scale
- Larger Businesses v Smaller Businesses
- Business Growth - Organic
- Advantages
- Can maintain current management style, ethics and culture of the business
- Less risk - usually financed using profits
- Easy to manage and control
- Less disruptive - ensures efficiency, productivity and moral among workers remains high
- Dis-advantages
- Can take a long time to grow a business internally and adapt to changes
- If the market isn't growing, the business is restricted to increasing its market share or finding a new market to sell products to
- Businesses might miss out on opportunities for more ambitious growth if they grow internally
- Issues in growing in size
- Large companies can suffer from diseconomiesscale
- More difficult to manage cash flow
- Increases risk of overtrading
- Wish to maintain culture
- Advantages
- Business Growth
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