** Theme Two AS level business

?
What is meant by the term economies of scale?
When there is a fall in average total cost as the scale of production increases
1 of 41
When does internal economies of scale occur?
It occurs due to an increase in the scale of production of a firm
2 of 41
When does external economies of scale occur?
It occurs due to an increase in the scale of production within the industry in which the firm operates
3 of 41
What are the 5 economies that are involved within the economies of scale?
Purchasing, Technical, Managerial, Financial, Diseconomies of scale
4 of 41
How can purchasing economies of scale help a firm or a business?
Discounts of bulk-buying
5 of 41
By a firm or a business using technical economies of scale what can this help to do?
Larger firms = spend more on bigger/efficient machinery, able to spread fixed costs over greater output, obtain lower costs per unit = increases competitiveness
6 of 41
How can managerial economies of scale improve a firm or a business?
Divisions of labour = help to focus workers, specific tasks allows workers to be better qualified, more experienced, more efficient
7 of 41
How will external economies of scale impact on a firm or a business?
A fall in average total costs due to factors outside of the control of the firm, impact other firms within the same industry, positive externalities = improved transport intrafrusructure, skilled workers
8 of 41
When does diseconomies of scale occur?
When there is an increase in average total costs as the scale of productions increase
9 of 41
What are the disadvantages of diseconomies of scale?
Larger firms will find it harder to communicate, increased cost for communication methods, difficult to manage the increased number of workers and customers, difficult to motivate workers
10 of 41
What discourages the growth of firms?
Higher average costs
11 of 41
What is meant by the term market power?
Market power is the extent to which a firm can control price and costs in a market
12 of 41
How can monopolies use their power to exploit customers and suppliers?
Exploit customers by charging high prices due to the lack of competition, exploit suppliers by threatening to cancel contracts to get lower prices
13 of 41
What are the advantages of increasing market share?
Lack of competition = develop/maintain customer loyalty, charge higher prices, economies of scale = bulk buying - reducing unit costs, use its financial resources to maintain its position
14 of 41
What is meant by the term occupational immobility?
Workers are not equipped for different types of work e.g. coal miner cannot easily transfer to become an accountant
15 of 41
What is the difference between organic growth and inorganic growth?
Organic (Internal) = opening new branches , new product development including disversification. Inorganic (External) = Merges and takeovers
16 of 41
What is meant by the term integration?
The bringing together of two or more firms
17 of 41
What is meant by the term merger?
When two or more firms agree to become integrated to form one firm under joint ownership
18 of 41
What is meant by the term take over?
When a firm gains control over another and becomes the owner = achieved by buying over 51% of shares
19 of 41
What is meant by the term horizontal integration?
When two firms are at the same stage within the process integrate
20 of 41
What is meant by the term vertical integration?
When two firms at different stages within the process of integrate e.g. a car manafacturer merges with a tyre supplier
21 of 41
What is meant by the term conglomerate integration?
Occurs when two unrelated firms integrate
22 of 41
What are the reasons why a company would use inorganic growth?
Secure supplier, secure outlet, brand recognition, achieve cooperate objectives
23 of 41
What is meant by the term product innovation?
Changing a product that already exists or developing are invention into a brand new product
24 of 41
What is meant by the term process innovation?
Changing a process of production that already exits or putting into practise a brand new production process
25 of 41
What is the product life cycle?
Product life cycle is a technique used to track the stages a product goes through during its life
26 of 41
How can extension strategies be applied onto the product life cycle?
Changing the product - new flavours or new features, increasing promotion or changing promotional methods - repackaging, targeting new market
27 of 41
Name some ways information can be shared in the digital market?
Price comparison websites, viral marketing, social media
28 of 41
Explain why small firms must use differentiation to compete?
Differentiation is important to provide a competitive advantage and allows them to compete against larger firms as they are in very specific niche market
29 of 41
Why is it essential for a small business to have a good customer service?
Helps to distinguish the product from the competition, obtain repeat custom, gain a good reputation
30 of 41
How do you calculate price elasticity of demand?
%change in quantity demand DIVIDE %change in price
31 of 41
How does Price elasticity of demand maximise revenue?
Allows seller to make pricing decisions to increase revenue
32 of 41
What are the different pricing strategies available to businesses?
Cost plus, price skimming, competitive, penetration and predatory
33 of 41
What is meant by the term cost plus?
Cost plus is when a percentage mark up is added to the cost of producing a good or service to calculate the selling price
34 of 41
What is meant by the term price skimming?
Price skimming involves setting a high initial price for a new product in order to recoup costs
35 of 41
What is meant by the term penetration pricing?
Price penetration involves setting a low initial price for a new product in order to get a foothold in the market and gain market share
36 of 41
What is meant by the term predatory pricing?
When prices are set low for a short period of time to force competitors out of the market
37 of 41
What is meant by the term competitive pricing?
Prices are based on the prices charged by competitors, maybe the same or slightly lower, firms will try to compete on other aspects of the marketing mix
38 of 41
What is meant by the term psychological pricing?
Occurs when a firm sets a price for the product in order to entice the customer into making a purchase by making it sound cheaper that it actually is e.g. £9.99
39 of 41
What are some factors that determine the most appropriate pricing strategy?
Strength of brand, stage in the product life cycle, price elasticity of demand
40 of 41
How do you calculate income of elasticity of demand?
%Change in quantity demand DIVIDE %Change in income
41 of 41

Other cards in this set

Card 2

Front

When does internal economies of scale occur?

Back

It occurs due to an increase in the scale of production of a firm

Card 3

Front

When does external economies of scale occur?

Back

Preview of the front of card 3

Card 4

Front

What are the 5 economies that are involved within the economies of scale?

Back

Preview of the front of card 4

Card 5

Front

How can purchasing economies of scale help a firm or a business?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Business Studies & Economics resources:

See all Business Studies & Economics resources »See all Growth resources »