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Worksheets1.6 Growth & evolution
Total questions: 24
Worksheet time: 19mins
Internal diseconomies of scale can be caused by
Being unable to purchase stocks at a discounted price
Management control being weakened with a larger workforce
Traffic congestion causing delays to delivery of important stocks
Advertising costs to a global audience
Which of the following is NOT a cause of internal diseconomies of scale?
A. Poor communication between different departments
B. Lack of staff morale and motivation
C. Less control, direction and coordination of human resources
D. Late deliveries due to congestion in busy locations
3. If a firm increases its use of all factors of production but sees an increase in its average costs, this is a sign of
A. Internal diseconomies of scale
B. External returns to scale
C. Diminishing marginal returns
D. Decreasing returns to scale
Internal economies of scale are those that
A. Result from changes in production techniques
B. Increase due to the growth of the industry as a whole
C. Generate lower unit costs
D. Reduce production costs in the short run
External economies of scale can arise from
Bulk purchases of raw materials, parts and components at favourable prices
The introduction and use of advanced technology
Specialised back-up services available in a particular region
Lower interest rates, thus reducing the cost of borrowing to large companies
Which one of the following is not a benefit of forming a conglomerate?
Spreading risks
Market power
Economies of scale
Focused marketing
In 2006, L'Oreal (the world's largest cosmetics and beauty firm) bought out The Body Shop. This is an example of
A management buy-out
A merger
Horizontal integration
Diversification
In 2006, Walt Disney agreed to a $7.4 billion deal to buy Pixar. This is an example of
A merger
A management buy-out
An acquisition
Horizontal integration
Which of the following is not a valid argument for pursuing growth as an objective?
To increase the chances of survival
To achieve economies of scale
To minimise communication problems
To achieve greater market share
Which one of the following is LEAST LIKELY to be an advantage of forming a strategic alliance?
Firms enjoy some of the advantages of mergers without losing their corporate identity
They are not as expensive as takeovers or mergers
Strategic alliances are founded on friendly, cooperative and mutual agreements
Profits from the strategic alliance can be shared equally
If several independent firms in the same office block share the use of a Secretary and Receptionist, then this is an example of
A joint venture
A strategic alliance
Economies of scale
Organic growth
An advantage of diversification could include the
Extra time and resources devoted to the new business venture
Economies of scale that may be achieved
Finance needed to fund the expansion plans
The required expertise, such as knowledge of new markets
A disadvantage of diversification is
A. The spreading of risks
B. The increased customer base
C. The entering of new markets
D. The degree of management control
Horizontal integration occurs when
A firm acquires or merges with another firm operating in a different stage of production
A firm acquires or merges with another firm at the same stage of production
Two or more firms that are in direct competition decide to merge
Two or more firms that are not in direct competition decide to merge
A business grows in size due to its own finance and retained profits. This process is known as
A. Organic growth
B. External growth
Acquisition
Conglomerate
A franchise is the
Person who buys the right to use someone else's products, logo, or brand name
Use of external growth to enlarge a multinational corporation
Right to trade using another firm's products, brand name, and logo
Person or business selling the right for others to use their name, logos, or products
A merger between two newspaper companies is an example of
A. Vertical integration
B. Horizontal integration
C. Lateral amalgamation
D. Conglomerate merger
Organic growth CANNOT be achieved through increased
Staff turnover
Sales turnover
C. Capital expenditure (investment)
D. Prices for certain products
Which of the following does not explain why small firms can survive and flourish?
Being able to provide a personalised service
Local monopoly power
Financial aid from the government
Choice of finance options
When two different organizations contribute resources to a shared project by forming a separate business, this is known as
External growth
A strategic alliance
A joint venture
Collaboration
One potential disadvantage of mergers is a change in
Market power
Synergy
Corporate culture
Access to technology and human resources
An advantage, to the buyer, of a takeover bid includes
Changes to corporate identity
Changes to corporate cultures
Possible redundancies
Potential market dominance
Reasons for airlines to form a strategic alliance include all the following, except
A. The airline companies keep their separate legal identities
B. They benefit from economies of scale from combined purchasing and marketing power
C. They can grow through diversification
D. They can cover more destinations (flight locations) by joining forces
A firm may choose to demerge (break up) for the following reasons, except to
Avoid falling profits in the business
Focus on a smaller range of products and services
Enjoy economies of scale
Focus more specifically on a target market
