Economies of Scale, Empowerment, and Business Growth Strategies
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Economies of Scale and Empowerment in Business
Economies of scale refer to a decrease in cost per unit produced, as the total scale of the production facility increases. Empowerment is a form of non-financial reward and motivational technique. It gives power to employees so they can make some of their own decisions regarding their work life.
Internal and External Growth
Internal growth refers to the growth of a business through increased sales or developing marketing activities. Internal growth is possible by cutting costs and selling goods at a lower price, increasing market share.
External growth involves external solutions such as joint ventures, mergers, and acquisitions.
Strategic Alliances: Advantages and Disadvantages
V suggested strategic alliances.
Advantages:
- Factories benefit from two managers who combine forces.
- Avoids the problem of RDB headquarters deciding on a sole manager. On their own, newly appointed local managers might not appreciate the RDB culture of high-quality ball bearings.
- Means a more diverse workforce.
Disadvantages:
- Two managers, being from different cultural backgrounds, could cause problems or could have different values and attitudes, which might create tension.
- Two managers may have different management/leadership styles, which could be confusing for the employees.
Just-In-Time (JIT) Advantages and Disadvantages
Advantages:
- Improves the working capital cycle.
- Reduces storage costs.
- Reduces the chances of holding unsellable stock.
Disadvantages:
- Large orders cannot be met (no stock).
- It can create some delays with suppliers.
Financial Ratios
- Gross Profit Margin (GPM): 53.39% to 43.90%
- Acid-Quick Test (AQT): 2.75 times to 2.31 times
Internal and External Stakeholders
Internal stakeholder: The workforce in the Swedish megafactory. With RDB closing the workplace, many will be laid off. Some are offered jobs in the new factory, but the majority of workers' jobs would be redundant, and workers would be unemployed.
External stakeholder: The Swedish government. Firstly, they would lose all taxes paid by RDB. Secondly, there would be an increase in unemployment in towns dependent on RDB. Thirdly, the Swedish government might pressure RDB to keep the factory there.
Benchmarking
Benchmarking is about comparing and evaluating a business to its competitors. A benchmark is then produced, and comparisons are made with the aim of not only meeting but exceeding them.
Collective Bargaining
Collective bargaining is the process in which management and employees have representatives who negotiate terms and conditions of employment.
Strategic Decision-Making (SDM) Process
The SDM process is rational, linear, and based on evidence/logic. A demonstrated that approach: she studied the external environment before preparing her strategic plan. Decisions are based on empirical evidence and reasoning.
Intuitive Decision-Making (IDM) Process
The IDM process relies more on feelings and spontaneity; it is irrational. HH is presented as a visionary: he couldn't have known that ball bearings would be so important in the 20th century. Valdemar is worried about Anna's plans.
Strategic Analysis and Implementation
Strategic analysis involves identifying where the company is; it involves a close examination of the internal and external environment (PEST and SWOT analysis). Strategic implementation, later in the strategic process, is deciding how to put the strategy into operation. It involves marketing decisions, HR decisions, and change management.
Consistency
Green engineering turns a personal mission into a corporate strategy.
Budgeting
Budget refers to an estimated plan of spending to renovate a factory.
- Current Growth Rate (CGR): 33.14
- Future Growth Rate (FGR): 45.77
- Return on Capital Employed (ROCE): 14.7
Advantages: Quantify possible outcomes, giving a basis for comparison.
Disadvantages: Factors other than quantitative ones play a role in decision-making.