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Biz > 2.1 - Growing a Business > Flashcards

2.1 - Growing a Business Flashcards

1
Q

What is business growth

A

When a business sells more output (amount) over a period of time

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2
Q

Why is business growth an important objective (4)

A
  • To help increase market share
  • To improve profits
  • To increase revenue
  • To help a business to open more branches
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3
Q

In what ways can business growth occur (4)

A
  • From employing more people
  • From opening more branches
  • From increasing sales or revenue
  • From increasing profits
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4
Q

What is another name for Internal growth

A

Organic growth

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5
Q

When does Internal growth occur

A

When a business decides to expand its own activities by launching new products and/or entering new markets.

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6
Q

Why is it riskier to enter new markets instead of launching new products to achieve internal growth

A

As businesses have not dealt with this market before and it may be costly and expensive

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7
Q

What are some ways a business can enter a new market (3)

A
  • Entering overseas markets
  • Amending its marketing mix (product, price, place and promotion)
  • Taking advantage of technology
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8
Q

What are some advantages of Internal (organic) growth (3)

A
  • It is low risk
  • A business can maintain its own values without interference from stakeholders
  • Higher production means the business can benefit from economies of scale and lower average costs
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9
Q

What are some disadvantages of Internal (organic) growth (3)

A
  • It is quite slow
  • there maybe be a long period between investment and return on investment
  • growth may be limited and is dependent on the reliability of sales forecasts
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10
Q

What is another name for external growth

A

Inorganic Growth

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11
Q

What does inorganic growth usually involve

A

a merger or takeover

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12
Q

What is a merger

A

Two businesses joining to form a new (but larger) business.

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13
Q

What is a takeover

A

An existing business expands by buying more than half the shares of another business.

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14
Q

What is Horizontal intergration

A

Two competitors joining through a merger or takeover.

The new business then becomes more competitive and increases its market share.

This gives it more control when negotiating and setting prices.

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15
Q

What is forward vertical integration

A

Business takes control with another that operates at a later stage in the supply chain.

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16
Q

What is Backward vertical integration

A

a business takes control of a business earlier in the supply chain.

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17
Q

What is Conglomerate integration

A

businesses in unrelated markets join through a takeover or merger.

This enables businesses to spread their risk over a wider range of products and services.

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18
Q

What are some advantages of external (inorganic) growth (2)

A
  • competition can be reduced

- market share can be increased very quickly overnight

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19
Q

What are some disadvantages of external (inorganic) growth (2)

A
  • it can be expensive to takeover/merge with another business
  • managers may lack the experience to deal with the other businesses
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20
Q

What are some advantages of being a PLC (3)

A
  • The business has the ability to raise additional finance through share capital
  • The shareholders have limited liability
  • There are increased negotiation opportunities with suppliers in terms of prices because larger businesses can achieve economies of scale
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21
Q

What are some disadvantages of being a PLC (3)

A
  • It is expensive to set up, requiring a minimum of £50,000
  • There are more complex accounting and reporting requirements
  • There is a greater risk of a hostile takeover by a rival company
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22
Q

What are 3 internal sources of finance

A
  • Retained profits
  • Selling of assets
  • The owners saving
23
Q

What is an advantage and disadvantage of retained profits

A

it is cheap, quick and convenient, and there is easy access to the money

But once the money is gone, it is not available for any future unforeseen problems the business might face

24
Q

What is an advantage(1) and disadvantage (2) of selling assets

A

It is convenient, can create space for more profitable uses, and can be quick

  • The business might not get the full market value of the assets or even sell them at all
  • The business might also need the assets in the future
25
Q

What is an advantage and disadvantage of using the owners savings

A
  • it is cheap, quick and convenient

- But the owner might not have enough savings or may need the cash for personal use

26
Q

What are 3 external sources of finance

A
  • Loan capital
  • Share capital - when a business becomes a PLC and offers shares to a select group of people
  • stock market flotation - PLC only
27
Q

What is an advantage(1) and disadvantage(3) of using Loan capital

A
  • regular repayments are made over a period of time
  • sometimes it can take a while for a loan to be approved and the business may not even qualify for a loan
  • Interest is applied, so this can be an expensive option
  • banks may also ask for collateral (security) in case the business fails to make repayments
28
Q

What is an advantage(2) and disadvantage(1) of using share capital

A
  • does not have to be repaid and no interest is applied
  • a business can choose to whom it offers shares
  • profits made by the business are paid to shareholders (these payments are also known as dividends), so control of the business gets diluted
29
Q

What is an advantage(3) and disadvantage(3) of stock market floatation

A

It can raise large amounts of capital as it is easy for the public to buy shares through a stockbroker or bank

the shares don’t have to be repaid and no interest is applied

the business can also gain recognition through this method

But:

it can be complicated and expensive and there is the possibility of losing control, as anyone can buy shares

the profits are paid to shareholders and the business records are made public

there is also the risk that some investors will only buy shares to make a quick profit by selling them when the share price increases

30
Q

What are the 9 main reasons why business aims and objectives change

A
  • Due to new or changing market conditions
  • Due to new or changing technology
  • As a response to performance
  • Due to legislation
  • Due to internal reasons
  • For survival purposes
  • To enter or exit markets
  • To grow or reduce workforce
  • to increase or decrease product range
31
Q

What is an aim

A

An overall goal for a business

32
Q

what is an objective

A

a step needed to achieve your aims

33
Q

What does the term market conditions refer to (3)

A
  • The size of the market
  • The competitors in the market
  • the proportions of large and small businesses in the market
34
Q

What are some commons technological developments

A
  • website developments
  • manufacturing developments
  • software developments
  • mobile technology developments
  • contactless, online, and mobile payment system developments
35
Q

What are the 2 types of business who mainly focus on survival

A
  • new businesses in their first year of operation

- established businesses under threat, for example from their competitors

36
Q

Why would a business want to exit a market (4)

A
  • If the size of the market is shrinking
  • Their products in the market have a poor performance
  • A new market opening up
  • The business failing overall
37
Q

Define globalisation

A

companies operating internationally or on a global scale

38
Q

What are the 3 main elements of globalisation

A

Imports
Exports
Business location

39
Q

What are the 2 main reasons for imports from other countries

A
  • If they cannot easily be manufactured in the UK eg Mangoes
  • If it is cheaper to buy from other countries eg. buying products from china or india due to cheap labour cost s
40
Q

What does SPICED stand for

A 
Strong 
Pound
Imports
Cheaper
Exports 
Dearer

Remember it’s the opposite if the pound is weak

41
Q

What are 4 advantages of increasing the scale of a business’s operations

A
  • More potential customers
  • Potential of more sales and profit
  • Potential to grow product range
  • Increased brand awareness
42
Q

What are 3 disadvantages of increasing the scale of a business’s operations

A
  • More responsibility
  • More risk
  • Potential for failure
43
Q

What are Multinational companies/ Transnational corporations

A

companies that operate in a number of countries around the world.

44
Q

What are the 2 main barriers to international trading

A
  • Tariffs

- Trading blocs

45
Q

What are Tariffs

A

A tax on imported goods and services
This restricts demand and promotes/ protects businesses in the home country

This is known as a protectionist measure

46
Q

What are Trading blocs

A

A group of countries that work together to provide special deals from trading promoting trading between them eg the EU

No tariffs within trading blocs but outside can be expensive tariffs

can only be apart of one trading bloc

47
Q

What are advantages of E-commerce

A
  • open 24/7
  • cheap to operate compared to physical stores

-gives access to a huge range of potential customers
easy to sell to overseas customers

-provides access to cost-effective promotional methods, such as social media and email advertisements

48
Q

How is each aspect of the marketing mix affected by international trading

A

Product - Have to be aware of others faiths eg. colours and dietary requirements

Price - Tariffs and trading blocs can increase the price. Also different countries have different levels of disposable income

Place - E-commerce may not be available everywhere and distribution links may be weak in some countries

Promotion - cultural and social differences, language and translations

49
Q

What are 3 examples of treating workers ethically

A

paying a fair wage
providing good working conditions
allowing flexible working

50
Q

What are 3 examples of treating suppliers ethically

A

paying fair prices
having reasonable expectations
paying bills on time

51
Q

What are 3 examples of treating Customers ethically

A

exceeding expectations eg. offering excellent quality
only providing what a customer needs - not costly extras
Giving clear and accurate information

52
Q

What are 3 advantages of being environmentally friendly

A
  • The government will offer you subsidies and grants
  • Lower costs eg electric cars
  • Increased sales
53
Q

What are 3 disadvantages of being environmentally friendly

A
  • Increased costs eg research and new methods of production
  • Time consuming
  • potential for inaccurate claims eg. saying you use no plastic but there are traces found
54
Q

How can pressure groups/ interest groups impact the marketing mix

A

product - change the product
price - change pricing strategies
place - change distribution methods
promotion - change the way a product is advertised

Biz (5 decks)

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