1.7 - Expanding A Business Flashcards

1
Q

Internal growth (organic growth)

A

A business gets bigger by selling more of its products

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2
Q

External growth (intergration)

A

When a business gets bigger by joining or buying another business

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3
Q

Market Capitalisation

A
  • A way of measuring the value of a company
  • Market Cap = Market Price of Share X Num. of Shares
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4
Q

What is a Franchise?

A

When a franchisor sells the rights of it’s products to a franchisee; usually in return of a fee and percentage of turnover.

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5
Q

What is a franchisee?

A

Buys a franchise in return for a fee and percentage of turnover

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6
Q

What is a franchisor?

A

Sells a franchise usually in return for a fee and percentage of turnover

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7
Q

What are the advantages of selling a franchise?

A
  • Can grow quickly
  • Franchisee provides some of the finance
  • Franchisees motivated as they are running their own business
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8
Q

What are the disadvantages of selling a franchise?

A
  • Lose some control
  • Danger of one franchisee’s problems affecting the entire brand
  • Have to share profits
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9
Q

Advantages of buying a franchise

A
  • Established brand
  • Access to training and supplies
  • Share marketing costs
  • Learn from other franchisees
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10
Q

Disadvantages of buying a franchise

A
  • Have to share profits
  • Have to follow guidlines
  • Have to contribute to group marketing
  • Sales suffer if other franchisee gets a bad reputation
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11
Q

Types of Internal Growth

A
  • Opening new stores
  • E-Commerce
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12
Q

Opening new stores

A

A type of internal (organic) growth

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13
Q

E-commerce

A

A type of internal (organic) growth, naturally grow the number of customers that you have access to

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14
Q

What is outsourcing?

A

When a business used other organisation to produce it’s product for it

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15
Q

What are the types of external growth?

A
  • Merger
  • Takeover (acquisition)
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16
Q

What is a merger?

A

A type of external growth, when two firms join together to create a joint business

17
Q

What is a takeover?

A

Occurs when one firm gains control of another firm and buy it up

18
Q

What are the types of integration?

A
  • Horizontal integration
  • Vertical integration
  • Conglomerate integration
19
Q

What is horizontal integration?

A

One firm joins with another firm at the same stage of the production process

20
Q

What is vertical integration

A

When a firm joins with another firm at a different stage of the production process, can be forward or backward

21
Q

What is conglomerate integration?

A

Occurs when one firm joins with another firm in a completely different type of production process

22
Q

Advantage of business expansion?

A
  • More power in market
  • More status, easier to launch products
  • Safer, harder to takeover
  • Rewards for staff linked to the size of the business
23
Q

Disadvantages of business expansion

A
  • Slower decision making
  • Isolated employees
  • Controlling a business can be less efficient
24
Q

What is an economy of scale?

A

When a business’s unit cost of production fall as its output rises as the business expands

25
Q

What is a diseconomy of scale?

A

Occur when a cost per unit increases as a business expands