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Economies of scale
Cost advantages that enterprises obtain due to their scale
of operation (typically measured by amount of output produced), with cost per
unit of output decreasing with increasing scale.Formula: TOTAL COSTS = FIXED COST
+ VARIABLE COST
Fixed costs are
costs that do not change as production changes.
Variable costs
are costs that vary as production changes
Diseconomies of scale
Sometimes when a business expands, it starts to experience
inefficiencies that increase average unit costs. This situation refers to
diseconomies of scale.
Efficiencies
Efficiency is not related to production alone.
A business can become more efficient if it can lower average
unit costs, regardless of the area of the business in which the savings per
unit occur.
ADVANTAGES OF BIG
BUSINESSES
Survival, Higher status, Market leader status, Increased
market share
ADVANTAGES OF SMALL
BUSINESSES
Greater focus, Greater cachet, Greater motivation, Competitive
advantage, Less competition
INTERNAL GROWTH
It occurs slowly and steadily and occurs out of the existing
operations of the business. The business expands by simply selling more
products or by developing its product range.
EXTERNAL GROWTH
A quick and riskier method of growth than internal growth
Also called fast-track growth because it is faster than the
internal method.
M&A
Two business become
integrated, either by joining
together and forming a bigger combined business (a merger) or by one business taking over the other (an
acquisition).
Horizontal,Backward vertical, Forward vertical,
Congloregation (two businesses in unrelated lines of business integrate)
JOINT VENTURES
2 businesses agree
to combine resources for a specific goal and over a finite period of time.
STRATEGIC ALLIANCES
More than two
businesses may be part of the alliance, No new business is created, Individual
businesses in the alliance remain independent, Strategic alliances are more
fluid than joint venture.
FRANCHISES
Franchisor (Original), franchisees (Sucursales)
THE IMPACT OF
GLOBALIZATION
Globalization is the process by which the world´s regional
economies are becoming one integrated global unit.
Globalization can have a significant impact on the growth of
domestic businesses for the following reasons: Increased competition, Greater
brand awareness, Skills transfer,
Closer collaboration, Meeting customer expectations, Increased customer base, Economies of scale, Greater choice of location, Increased sources of finance
MARKETING
It is one of the business functions, and it is essential to
its success. Marketing is not JUST selling or advertising, it englobes a lot
more
MARKETING OF GOODS
AND SERVICES
INTANGIBLITY,( goods are tangible (physical),
services are not) INSPARABILITY,( services are consumed at the time of
purchase) HETEROGENITY,( mass production of goods (they are all the
same, homogeneous) but services are heterogeneous because they are all
different) PERISHABILITY(Services cannot be stored or re used)
Benefits of being product-orientated
·It is associated with the production of
high-quality products such as luxury sports cars and safety products such as
crash helmets.·It can succeed in industries where the speed of change is slow, and the firm has already built a good reputation.
·It has control over its activities, with a strong belief that consumers will purchase its products.
Limitations of being product-orientated
·Since the firm ignores the needs of the market, it takes risks that may lead to eventual business failure or closure.
·Spending money on research and development without considering consumer needs could be costly and not yield any promising results (as not being sure that what you are trying to sell is something people would want to buy).
Benefits of being market-orientated
·As a result of market research, firms have increased confidence that their products will sell, therefore reducing the risk of failure.
·Access to market information means that firms can respond more quickly to changes in the market and are also able to anticipate market changes.
·Firms will be in a strong position to meet the challenge of new competitors entering the market as a result of regular feedback from consumers brought about by market research.
Limitations of being market-orientated
·Conducting market research can be costly and therefore weigh heavily on a firm’s budget.
·Due to frequently changing consumer tastes, firms may find it difficult to meet every consumer’s needs with its available resources.
·Uncertainty about the future could also have a negative influence on market-planning strategy.
COMMERCIAL MARKETING
It is the “normal” marketing you know. It involves creating, developing, and exchanging goods or services that customers need and want.
SOCIAL MARKETING
This involves the use of marketing approaches that help bring about changes in behavior that ultimately benefit society.
SOCIAL MEDIA MARKETING
Marketing approach adopted by businesses that uses social networking websites from the Internet to market its products.
Benefits
Direct feedback while still appealing to them personally (interactive). Provide customers with the opportunity to ask questions and voice their complaints. This is known as social customer relationship management.
Low-cost and reach a large target audience.
It can enhance a firms brand.