Unit 3 Business growth

Question 1

What are ways if measuring the size of a business

Answer 1

Value of the business- cost to buy it
Revenue/turnover- annual sales not including cash.
Profit- annual
Market share- % of people in the market it is in are its customers

Question 2

What is the definition of internal growth

Answer 2

When a business grows on its own. No other businesses are involved. It is because of its own actions that the business grows.

Question 3

How can a business grow internally

Answer 3

One way is to improve the marketing mix which would lead to repeat sales, a bigger market share and a larger profit.
Another way is to innovate as this produces new products which may cause a rise in revenue.

Question 4

What is the definition of external growth

Answer 4

When other businesses are involved

Question 5

How can a business grow externally

Answer 5

By purchasing another business and incorporating it into the other one. Called a TAKEOVER.
Joining forces with another business and taking a share of each others profits is another way and is called a MERGER.

Question 6

What is the definition of economies of scale

Answer 6

The benefits of business growth

Question 7

What is the definition of diseconomies of scale

Answer 7

The drawbacks of business growth

Question 8

What are examples of economies of scale

Answer 8

Bulk buying is cheaper
It is easier to get finance as banks are more willing to let you borrow money.
You will have access to specialized workers who increase efficiency and productivity.

Question 9

What are examples of diseconomies of scale

Answer 9

Staff do not feel a part of the business so productivity decreases as motivation for employees falls which may result in them quitting.
Communication becomes difficult and slow meaning important to innovative ideas can not be passed on so the business may miss an opportunity.

Question 10

How do businesses avoid diseconomies of scale

Answer 10

Planning recruitment and training in advance
Investing in new technology to speed up communication
Having a flexible structure so that they can respond to change

Question 11

What is the definition of a monopoly

Answer 11

And business that owns more that 25% of a market and can INFLUENCE the market.

Question 12

What are the negatives of monopolies

Answer 12

They can charge high prices
Standards of products slip
Buy rivals and discontinue their products
Lose touch with development

Question 13

What are the positives of monopolies

Answer 13

They have a lot of experience in the market
Safety is paramount
Standardized

Question 14

What is the definition of collusion or cartel

Answer 14

Monopolies that are illegal are known as collisions. This is where more than one business works together to benefit themselves. This is controlled by a number of regulations.

Question 15

What is the definition of a natural monopoly

Answer 15

What’s market conditions dictate that it is in everyone’s best interest for the business to be in a monopoly position

Question 16

What is the definition of regulation

Answer 16

When limitations are put in place to ensure customers are treated fairly and receive a quality product or service. They are measures put in place to ensure fair, safe and responsible practices by businesses.

Question 17

What factors can be regulated

Answer 17

Price
Quality standards
Preventing businesses from acting in socially unacceptable ways
Making business provide for customers in hard to reach areas

Question 18

What are the positives and negatives of having no regulations

Answer 18

There are no positives to the consumer.

Negatives are that customers would be vulnerable and would not be able to get refunds

Question 19

What is the definition of self regulation

Answer 19

When a company makes their own guidelines and can set rules internally.

Question 20

What are the advantages and disadvantages of self regulation

Answer 20

+ Any regulation is in the customers interest
It means that customers can take businesses to court.

_ it is not legal for businesses to follow their own rules.

Question 21

What is the definition of government regulations

Answer 21

Laws that are passed to government to force regulation in to businesses and protects the consumer.

Question 22

What are the advantages and disadvantages of government regulations

Answer 22

+ customers will get legal protection and can have confidence in them.
_ businesses say that in order to meet regulations they have to cut production and invest in technology.

Question 23

What do the competition commission do

Answer 23

They regulate takeovers and mergers where there is a risk of the merging two businesses having an unfair amount of market control.

Question 24

What is a protection pressure group

Answer 24

And pressure group that exists to fight a SPECIFIC issue

Question 25

What is a promotional pressure group

Answer 25

And formal pressure group that fights campaigns on a WIDE range of issues. Some of these are on a large scale and are very well organized.

Question 26

What factors will affect how a business may respond to a pressure group

Answer 26

Size of business or pressure group
The disruption created 
Changes the group want to make
Credibility of group
Where the customers are located
Market share of the business
The type of business