2.1 - Growing The Business Flashcards
(31 cards)
What is another name for organic growth?
Internal growth
What is organic growth?
Grows by expanding its own activities
Less risky
Inexpensive
What are 2 methods of roganic growth?
Targeting new markets - new technology
Developign new products
What is another name for inorganic growth?
External growth
What is inorganic growth?
Involves a merger or takeover
What is a merger?
2 firms join together
What is a takeover?
Existing firm expands by buying more than 1/2 shares in another firm
What 4 ways can a firm merge with or take over other firms?
Join with:
Supplier
Competitor
Customer
Unrelated firm - diversifying business
What are economies of sale?
A reduction in average unit cost that comes from producing on a large scale
What is diseconomy of sale?
Where growth can lead to an increase in average cost
What are internal sources of finance?
Retained profit
Fixed assets
What are external sources of finance?
Loan capital
Share capital
What is retained profit?
The amount of a business’s income that is kept within its accounts, rather than paid out to shareholders
What are fixed assets?
Assets which are purchased for long time use such as land/buildings/equipment
What is loan capital?
Sum of capital borrowed from a bank and payed back in installments
What is share capital?
The total value of a company’s shares that have been issued to shareholders
What are shareholders?
A person/company that owns shares in a company’s stock
As a business grows, the owners might choose to make it a public limited company
What are its advantages?
Lots of capital raised
Diversify
Limited liability
As a business grows, the owners might choose to make it a public limited company
What are its disadvantages?
Hard for lots of shareholders to agree how a business is run
Public accounts so competitors can see if a business is struggling
Little profit due to many shareholders
What is a public limited company?
business that is managed by directors and owned by shareholders
What is a private limited company?
a type of business entity that is privately owned, either by an individual or a group
Why may business aims and objectives change?
They want to survive/grow
Change size of workforce
Enter/exit markets
Change size of product range
What is globalisation?
Businesses and countries around the world become more connected - easy to export or import
How can globalisation effect businesses?
Imports - large market to buy from
Exports - large market to sell to
Multinationals - single businesses operating in many countries
