all theme 2 Flashcards
praj the plug came thru jeez just go through all the content on this
What is organic growth and what are the examples of this?
Organic growth is internal growth:
when a business grows by expanding on its own without mergers or takeovers from other businesses.
New products Innovation Research Development New markets Through changing the marketing mix Taking advantage of technology Expanding overseas
What is inorganic growth and what are the examples of this?
External
When a business combines with another to grow.
Takeover: When one business joins another
Merger: When two ore more businesses join together
What are the advantages and disadvantages of a business going through organic (rather than inorganic) growth?
PROS:
A business that grows from within can retain their own company culture
Higher production means the business can benefit from economies of scale and lower average costs
More influence comes with more market share, the business can start setting prices for the industry
CONS:
This is a very high risk strategy, opening lots of stores or taking on new staff is very risky
Long period between investment and return on investment
Growth may be limited and is dependent on reliability of sales forecasts
Describe how economies of scale work
When your costs decrease due to larger levels of production:
More products being produced means more materials being ordered more regularly
Bulk orders reduce price
Variable cost per unit reduced (remember this point)
What are the advantages and disadvantages of a business mergers
PROS:
Economies of scale. Better deals because of increased order size, bulk-buying discounts etc.
Increased revenue and market share.
Buying technology
International Expansion. Buying a business in another country helps with culture issues, foreign laws etc.
CONS:
Clash of cultures
Possible communication problems
Unreliable merger partners
What is an internal source of finance and what are examples of this?
Capital gained within a business.
Retained Profit
Selling Assets
Personal Savings
What is an external source of finance and what are examples of this?
Capital gained outside a business.
Loan capital (bank loan)
Share capital
Stock market flotation
What are the advantages and disadvantages of loan capital? ( bank loan)
PROS:
Improve cash flow
Financial advice
CONS:
Time for approval
Interest
Expensive
Collateral (if u’re a set 8 kid lemme define it for u)
collateral is something pledged as security for repayment of a loan, to be forfeited in the event of a default. so basically heres an example
“she put her house up as collateral for the bank loan”
What are the advantages and disadvantages of share capital?
PROS:
Large amounts of capital
No interest
Does not need to be repaid
CONS:
Loss of control
What is a public limited company?
When a private limited company (a business owned by its shareholders) makes shares available to the public to purchase. This process is stock market flotation
What are the pros and cons of stock market flotation?
PROS:
Large amounts of capital
No interest
Does not need to be repaid
CONS:
Loss of control (As all the shareholders vote on decisions)
What might business aims and objectives change in response to?
Market conditions Technology Legislation Growth Consumer taste
As a business evolves, how would its focus on survival or growth alter?
It would be less focused on survival as it starts to pass the break even point. Once it starts to make a profit, growth will be the preferred choice.
As a business evolves, how would its focus on entering or exiting markets alter?
It will change the markets it is in. For example it may:
Enter new markets so that the business is growing by venturing in new areas
Exit markets if they see that they aren’t making enough sales in that area
As a business evolves, would it be growing or reducing the workforce?
It may decide to:
Grow the workforce so that the business can have a higher production rate
Reduce the workforce if it has become more reliant on technology that they’ve aquired through growth
As a business evolves, would it be increasing or decreasing its product range?
Just like with entering and exiting markets, a business may:
Increase its product range so that the business is growing by venturing in new areas
Decrease their product range if they see that they aren’t making enough sales in an area
How would market conditions effect business objectives?
There may be lots of new competitors entering the market, this will mean the business has to change their aims.
E.g. there may be increased unemployment in a country which is affecting the demand for the business’s goods or services
How would growth effect business objectives?
A business may change its aims and objectives in response to its own performance.
For example if it has done well in the year and made lots of profit it may decide to grow and expand and take on more staff.
However if a business has had a bad year it may decide to reduce the number of staff and focus on core business instead.
How would legislation effect business objectives?
For example now in the UK there is a Minimum wage law a business may have to change its aims, as growth may be slower because they have to pay the new higher wages.
They may also decide to use workers abroad as their minimum wage may be lower/non-existent and so their costs will be less.
What is Globalisation?
The ever-increasing integration of the world’s local, regional and national economies into a single international market. (basically when every1 sells in one big fat obese market)
What are the advantages and disadvantages of globalisation? (quite a lot lol)
u dont need to learn all of these but just most of them
PROS:
- Encourages producers and consumers to benefit from deeper division of labour and economies of scale
- Competitive markets reduce monopoly profits and incentive businesses to seek cost-reducing innovations
- Enhanced growth has led to higher per capita incomes – and helped many of poorest countries to achieve faster economic growth and reduce extreme poverty measured as incomes < $1.90 per day (PPP adjusted)
- Advantages from the freer movement of labour between countries
- Gains from the sharing of ideas / skills / technologies across national borders
- Opening up of capital markets allows developing countries to borrow money to over a domestic savings gap
- Increased awareness among consumers of challenges from climate change and wealth/income inequality
- Competitive pressures of globalisation may prompt improved governance and better labour protection
CONS:
- Inequality: Globalisation has been linked to rising inequalities in income and wealth. Evidence for this is the growing rural–urban divide in countries such as China, India and Brazil. This leads to political and social tensions and financial instability that will constrain growth. Many of the world’s poorest people do not have access to basic technologies and public goods. They are excluded from the benefits.
- Inflation: Strong demand for food and energy has caused a steep rise in commodity prices. Food price inflation (known as agflation) has placed millions of the world’s poorest people at great risk.
- Vulnerability to external economic shocks – national economies are more connected and interdependent; this increases the risk of contagion i.e. an external event somewhere else in the world coming back to affect you has risen / making a country more vulnerable to macro-economic problems elsewhere
- Threats to the Global Commons: Irreversible damage to ecosystems, land degradation, deforestation, loss of bio-diversity and the fears of a permanent shortage of water afflict millions of the world’s most vulnerable
- Race to the bottom – nations desperate to attract inward investment may be tempted to lower corporate taxes, allow lax health and safety laws and limit basic welfare safety nets with damaging social consequences
- Trade Imbalances: Global trade has grown but so too have trade imbalances. Some countries are running big trade surpluses and these imbalances are creating tensions and pressures to introduce protectionist policies such as new forms of import control. Many developing countries fall victim to export dumping by producers in advanced nations (dumping is selling excess output at a price below the unit cost of supply.)
- Unemployment: Concern has been expressed by some that capital investment and jobs in advanced economies will drain away to developing countries as firms switch their production to countries with lower unit labour costs. This can lead to higher levels of structural unemployment.
- Standardisation: Some critics of globalisation point to a loss of economic and cultural diversity as giant firms and global multinational brands dominate domestic markets in many countries.
- Dominant global brands – globalisation might stifle competition if global businesses with dominant brands and superior technologies take charge of key markets be it telecommunications, motor vehicles and so on.
What are imports and exports?
An import is the purchase of a good or service from a foreign business that leads to a flow of money out of the UK.
therefore, the UK buyer will have to change pounds into the seller’s currency to make the transaction.
An export is the sale of a good or service to a foreign buyer that leads to a flow of money into the UK.
therefore, the foreign buyer will have to change their currency into pounds to complete the purchase.
What is a multinational company? (i mean its in the name if u dont know this u need help)
Companies that own or control production or service facilities outside the country in which they are based.
What are tariffs?
A tariff is a tax placed on an import to increase its price and decrease its demand (goods that cost too much don’t sell well).
Tariffs can be imposed by governments to raise revenue and to restrict imports.
Tariffs help to persuade consumers will switch and buy UK made goods.
Why are tariffs important for the UK’s economy in terms of exports and imports?
Tariffs encourage less imports meaning there will be relatively (compared to imports) more exports.
As exports are incoming money and imports are outgoing money, a decrease in imports means the UK will make more money
What are the advantages and disadvantages of tariffs?
PROS:
UK produced goods do not have to pay the tariff and so are likely to be cheaper allowing UK businesses to gain a price advantage compared to imports
It can protect new start-up businesses from being swamped by international competition from MNEs
It can raise important tax revenue for government which can be spent possibly on infrastructure (bridges and roads)
CONS:
High import price won’t put many customers off
Tariff may just increase prices for consumers
Other countries may impose their tariffs in response to this on their imports, (e.g. when the UK exports to China they make our goods more expensive)
