Question 1

An SME is a small manufacturing enterprise

Accepted Answer

SME stands for Small and Medium-sized Enterprise, which can include various types of businesses, not just manufacturing.

Question 2

By growing a business may benefit from economies of scale

Accepted Answer

Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale. This means as a business grows, it can reduce its costs and potentially increase its profitability.

Question 3

Economies of scale occur when total costs fall as the scale of production increases

Accepted Answer

Economies of scale occur when the average cost per unit decreases as the scale of production increases, not the total costs. Total costs may still rise, but at a slower rate than output.

Question 4

Synergy occurs when there are diseconomies of scale

Accepted Answer

Synergy occurs when combined efforts or operations of entities produce a greater effect than the sum of their individual effects, whereas diseconomies of scale refer to a point where a company grows so large that the costs per unit increase.

Question 5

A takeover occurs when one business gains control of another. It is a form of internal growth

Accepted Answer

A takeover is a form of external growth, as it involves one company acquiring another to expand its operations, rather than growing through its own internal business activities.

Question 6

Which of the following is an example of horizontal integration?
A) Car manufacturer buys car manufacturer
B) Car manufacturer buys a tyre manufacturer
C) Car manufacturer buys a car retail sales outlet
D) Car manufacturer buys ice cream retail outlets

Accepted Answer

Horizontal integration occurs when a company acquires or merges with another company in the same industry at the same stage of production. In this case, a car manufacturer buying another car manufacturer is an example of horizontal integration, as it involves companies in the same industry and at the same production stage.

Question 7

Which of the following is an example of conglomerate integration?
A) Car manufacturer buys car manufacturer
B) Car manufacturer buys a tyre manufacturer
C) Car manufacturer buys a car retail sales outlet
D) Car manufacturer buys ice cream retail outlets

Accepted Answer

Conglomerate integration occurs when a company expands into an industry that is unrelated to its current industry. In this case, a car manufacturer buying ice cream retail outlets represents a move into a completely different industry, which is an example of conglomerate integration.

Question 8

Which of the following is an example of forward vertical integration?
A) Car manufacturer buys car manufacturer
B) Car manufacturer buys a tyre manufacturer
C) Car manufacturer buys a car retail sales outlet
D) Car manufacturer buys ice cream retail outlets

Accepted Answer

Forward vertical integration occurs when a company acquires or merges with a company that is closer to the final consumer in the supply chain, such as a car manufacturer buying a car retail sales outlet. This allows the manufacturer to control the distribution and sale of its products directly.

Question 9

Which of the following is an example of backward vertical integration?
A) Car manufacturer buys car manufacturer
B) Car manufacturer buys a tyre manufacturer
C) Car manufacturer buys a car retail sales outlet
D) Car manufacturer buys ice cream retail outlets

Accepted Answer

Backward vertical integration occurs when a company acquires another company that supplies inputs to the acquiring company's production process. In this case, a car manufacturer buying a tyre manufacturer is an example of acquiring a supplier, which is backward vertical integration.

Question 10

A franchisee buys a franchise from a franchisor

Accepted Answer

A franchisee purchases the rights to use a franchisor's business model and brand for a specified period of time, effectively buying a franchise from the franchisor.

Question 11

Greiner's model shows the crises that can occur as a result of takeovers

Accepted Answer

Greiner's model, also known as Greiner's Curve, outlines the crises that organizations typically face as they grow, focusing on internal challenges and phases of evolution, not specifically on takeovers.

Quiz 10: Strategies for Growth

An SME is a small manufacturing enterprise

By growing a business may benefit from economies of scale

Economies of scale occur when total costs fall as the scale of production increases

Synergy occurs when there are diseconomies of scale

A takeover occurs when one business gains control of another. It is a form of internal growth

Which of the following is an example of horizontal integration?

Which of the following is an example of conglomerate integration?

Which of the following is an example of forward vertical integration?

Which of the following is an example of backward vertical integration?

A franchisee buys a franchise from a franchisor

Greiner's model shows the crises that can occur as a result of takeovers