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Flashcards in growing a business Deck (63):
1

5 reasons why businesses grow ?

- economies of scale
- diversification
- financail support
- personal vanity
- domination of the market

2

3 main methods of organic growth ?

- increase market share
- sell in new markets
- launch a new product

3

4 basics method of inorganic growth ?
(merge with or take over)

- suppliers
- customers
- competitor
- unrelated firm

4

an other way of a business expanding ?

franchising

5

expansion affects on stakeholders of:
A) shareholders
B)employees
C)customers
D)government
E)local community
F)suppliers
positive and negative

A) increased profit
they will have to invest more money
B) better job security
they may feel less involved
C) lower prices will be charged
but fewer competitors mean higher prices
D) more taxes
E) negative impacts like traffic will get worse
but more jobs
F) increased sales
might lose to competitors

6

pros of becoming a public limited company ?

- limited liability
- raise capital by selling shares on stock exchange
- increased capital allows the company to grow and diversify
- status of the company is increased

7

cons of becoming a public limited company ?

- shareholders own the company
- someone can buy enough shares to take over the business
- shareholders only want to make a profit

8

examples of social costs a business can have ?

- environmental costs
- non-renewable resources
- products can be harmful to people's health
- unethinical activities

9

example of social benefits a business can have ?

- taxes provide money for schools hospitals
- provides jobs
- provides all sorts of services
- goods they provide can improve people's health

10

why do firms become multinational ?

- transport costs
- local market costs
- avoid trade barriers inside a country
- foreign exchange
- raw materials or cheap labour
- avoid paying taxes
- lower wages

11

how do MNE'S benefit the host countries ?

- foreign investments
- create employment
- foreign technology
- tax

12

how do MNE'S not benefit the host countries ?

- wages are too low
- long working hours
- they may ask for reduced tax rates
-environmental degradation

13

5 stages of a product life cycle ?

-development
-introduction
-growth
-maturity
-decline

14

what is a product portfolio ?

is a range of different products that a firm sells

15

ways to extend a products life ?

-making changes to the design
-discounts

16

ways to broaden their product portfolios ?

-adding products to an existing range e.g new colours in a shoe product
-developing different products e.g making a line of clothes when you sells shoes

17

what is penetrating prices ?

low prices are charged when a product is new

18

what is loss leading prices ?

price is set below costs

19

what is price skimming ?

high price when product is new

20

competitive pricing ?

charging similar prices to competitors

21

what is cost plus pricing ?

adding the costs and then 25% of the costs on top of that

22

7 types of sales promotions ?

-discounts
-product trails
-free gifts
-buy one get one free
-competitions
-point of sale advertising
-use of credit

23

what is direct marketing ?

contacting the potential customers directly e.g through email or mail

24

examples of sponsorship ?

-sport - international competition
-television
-the arts - theatres etc

25

what is retained profits ?

-profits that owners have decided to plough back into the business after they've paid themselves a dividend

26

what is re-invested savings

profit from previous years to build up bank savings etc

27

what is fixed assets ?

raising cash by selling fixed assets e.g machinery

28

what is shares ?

a limited company can issue more shares.

29

what is debentures ?

limited companies can issue debentures to the public. long term loans which commits itself to repay with interest.

30

what is loans/mortgage ?

using banks for a loan for the business or buildings that have to be repaid with interest

31

what determines what source of finance a business can take out ?

-type of company
-amount of money needed
-length of time the money is needed for
-cost of finance
-state of economy

32

how to calculate Gross profit margin ?

gross profit/ sales

33

how to calculate net profit margin ?

net profit/sales

34

how to calculate current ratio ?

current assets/current liabilities

35

how to calculate acid test ratio ?

(current assets - stock) / current liabilities

36

3 types of ways to organise the structure of the business ?

-by function e.g managing director and finance director
-by product e.g toys and clothing
-by region e.g north america and europe

37

what is centralising organisation?

all major decisions are made by one person
made by an experienced person
it can take along time for messages to get up and down the chain

38

what is decentralising organisation ?

authority to make decisions are shared out
wide range of knowledge is used
but is inconsistent decisions made between different departments can cause problems

39

why is a long chain of control of communication a problem ?

-long time for messages to get from the top to the bottom of the chain
-people at the bottom of the chain can feel isolated and demoralised

40

what is the problem with a wide span of control ?

- one person has to communicate with a lot of people
- messages can take a long time to get to everyone that need to receive them

41

3 types of training ?

-induction
-on the job
-off the job

42

what is appraisal ?

where managers keep track of employees progress and needs

43

3 stages of appraisal ?

agree performance targets
training to help worker meet targets
discuss how well the targets were met

44

how can workers motivation be improved ?

-financial rewards
-training
-styles of management
-job security

45

what is specialisation in a business ?

people that a good at a certain skill or task only do that one thing

46

pros of specialisation ?

- workers become even more skilled in that on one thing
- complex production is broken up
- work and production becomes more efficient as people are only doing things they are skilled at

47

cons of division of labour ?

specialisation leads to division of labour this means :
- workers get bored
- this leads to poorer quality
- one worker or set of workers can halt production in the whole business
- people can become over specialised

48

what is flow production ?

making lots of things continuously, one product that is identical.

49

pros of flow production ?

- good for mass market e.g soft drinks

50

cons of production ?

- machinery is normally needed to be done well
- can be expensive to run
- normally have to be done 24 hrs a day

51

two non lean stock control methods ?

- traditional - a reorder level is set and when a stock gets to that a set amount more
- just in case - they have buffer stocks avaliable just in case demand increases

52

what a lean stock control method ?

just in time - stock arrives immediately before it is used

53

what is rationalisation ?

reorganising the increase efficiency

54

what is methods for rationalisation ?

-closing an administrative department and delegating
-closing a factory and moving the production to another site
-reducing the number of managers

55

6 mains internal economies of scale ?

-purchasing economies
-marketing economies
-managerial economies
-financial economies
-technical economies
-risk bearing economies

56

what are the 4 main external economies of scale ?

-suppliers
-local workforce
-good reputation
-local councils and national government

57

what are the diseconomies of scale ?

when your unit costs go up when your business grows

58

what are the types of diseconomies of scales ?

-management is more difficult
-demotivation of workers
-production process might become more complex more difficult to coordinate

59

what is quality control ?

spotting problems before it's too late

60

what are the 3 stages of quality control ?

1. check raw materials
2. quality of work in progress
3. random samples taken finished products

61

what is total quality control ?

a strategy that aims to make quality the responsibility of every employee in an organisation

62

what are quality circles ?

groups of of workers from various departments and meet regularly to identify quality problems and offer solutions

63

how does rapid growth make it hard to maintain control ?

- a business can be overwhelmed and cut corners
- may become expensive to carry out quality inspections
- might need new workers and uses time and money
- they might have to outsource some tasks. This can be expensive