Growing the business

Question 1

Why is business growth an important objective?

Answer 1

helps to increase market share
lead to lower costs
results in more profit

Question 2

How does internal growth occur?

Answer 2

A business expands by itself by bringing out new products or entering new markets

Question 3

Methods of internal growth

Answer 3

New markets - changing the marketing mix to find new markets or expanding overseas
New products - innovating or researching and developing brand new products that are not currently available
new technology - large organisation can benefit from investing in the latest technology or in the ability to develop new technology themselves

Question 4

External (inorganic growth)

Answer 4

faster way for a business to grow by joining forces with another

Question 5

Two approaches to external growth

Answer 5

Merger - two or more businesses voluntarily agree to join up and work as one business
Takeover - one business buys another
to take over a company it is necessary to gain control by buying enough shares

Question 6

Backward vertical

Answer 6

business joins with one at a previous stage (e.g supplier)

Question 7

Horizontal

Answer 7

businesses at the same stage

Question 8

Conglomerate

Answer 8

businesses with no common business interest join

Question 9

Forward vertical

Answer 9

business join with one at a later stage (e.g a customer)

Question 10

Public limited company

Answer 10

An incorporated business that can sell shares to the public on a stock exchange

Question 11

Stock exchange

Question 12

How can a private limited company (Ltd) change into a public limited company?

Answer 12

Through a stock market flotation

this is where business issues shares for sale on the stock exchange

Question 13

Benefits of being a PLC

Answer 13

ability to raise finance through short capital
limited liability
considered more prestigious and reliable
maybe able to negotiate better prices with suppliers
great public awareness of business

Question 14

Drawbacks of being a PLC

Answer 14

more complex accounting and reporting procedures
risk of potential takeovers
increased public and media attention
less privacy around financial performance
greater influence on decision making by external shareholders

Question 15

Internal sources of finance

Answer 15

Sales of assets -
a large business may have assets that it no longer needs such as fixed assets or excess stock
selling assets is a quick way of raising capital
business loses benefit of owning the asset it sells

Retained profit -
safest form of finance - involves no risk or debt
profit is not guaranteed and a business may require a more substantial investment than it can make as profit

Question 16

External sources of finance

Answer 16

Long capital -
long-term bank loan can break secured against the businesses asserts
interest will be charged and the business will have two make fixed repayments to repay the debt

Share capital -
A PLC can raise considerable capital by selling shares
selling shares puts PLC’s at risk of being taken over
stakeholders are also entitled to a share if the profits through dividends

Question 17

Dividend

Question 18

Why may business objectives change?

Answer 18

As business evolve and grow their objectives change to adapt to their internal needs and the external pressures of the environment

Question 19

External factors affecting business objectives

Answer 19

Competition - as new competitors enter the market or current competitors grow and become more competitive a business may change its objective and become more competitive

Technology - adoption of new technology or the innovation and invention of new products made possible by technology

Market conditions - economic climate may change the level of demand and spending in the market
a fall or rise in demand will influence a businesses ambitions and objectives

Legislation - may force a business to change its products and services
may restrict the businesses operation or create new opportunities

Question 20

Internal factor affecting business objectives

Answer 20

The annual objects reflect the previous performance of a business
a change in work culture or the business’s leaders is also likely to influence its objectives so that they match the ambitions of the managing director or CEO

Question 21

Targets for a growing business

Answer 21

expands the product range 
enter new markets 
increase sales 
increase profits 
gain a larger market share 
take over other businesses 
open new stores 
increase the workforce

Question 22

Targets for a struggling business that focus on survival

Answer 22

decrease the product range
exit markets
achieve enough sales to break even improve efficiency
maintain market share
reduce costs - close stores, reduce workforce

Question 23

Retrenchment

Answer 23

business downsizes the scale of its operations e.g by decreasing the range of products it sells or closing some of its stores

Question 24

Globalisation

Answer 24

business operate internationally and gain a lot of influence or power

Question 25

Imports

Answer 25

the flow of goods and services into one country from another country

Question 26

Exports

Answer 26

the flow of goods and services out of one country to another country

Question 27

Impacts of globalisation

Answer 27

Imports - allows businesses to import products and raw materials at lower prices than they would be able to produce them for in the UK importing products increases competition from foreign businesses that are able to sell directly to UK costumers Exports - exporting opens up new international markets for business and gives them potential to grow operation International markets can be different to operating in the UK business may face problems if they lack the necessary knowledge Location - brings the opportunity for business to relocate to other countries may be to benefit from lower labour costs, to be closer to raw material or to be closer to the markets to which they sell their products

Question 28

Multinationals

Answer 28

a large company with facilities and markets around the world are powerful businesses that can create lots of jobs and growth the. they enter a country however smaller local businesses can lose out - especially in less economically developed countries

Question 29

Benefits of globalisation for businesses

Answer 29

new market opportunities | access to technology and resources

Question 30

Drawbacks of globalisation for businesses

Answer 30

Threat from foreign competition | challenge of adapting products ad services to meet the needs of foreign consumers

Question 31

International trade

Answer 31

the exchange of goods and derives between countries

Question 32

Free trade

Answer 32

there are non barriers to trade between countries

Question 33

Protectionism

Answer 33

when some governments take actions that restrict thew flow of imports into their countries

Question 34

Types of trade barriers

Answer 34

Quotas - physical limited on imports Subsidies - Money given to help domestic producers Trade blocs - promote trade between small countries Non-tariff barriers - imposes quality or safety standards Tariffs - taxes on imports

Question 35

Reasons fo trade barriers

Answer 35

protecting jobs in domestic industries protecting emerging industries preventing the dumping of cheap goods on the domestic market and the entry of undesirable goods raising revenue from tariffs

Question 36

Trade blocs

Answer 36

created when the governments of different countries agree tot act together to promote trade among themselves this agreement gives members of nations of the trade bloc preferential treatment in other countries within the trade bloc to encourage trade between the countries trade blocs - The Association go the Southeast Asian Nations (ASEAN) The North American Free Trade Association (NAFTA)

Question 37

E-commerce

Answer 37

enables businesses to access international markets without the need to distribute or sell their products through foreign retailers business can trade 24 hours a day promote themselves through social media sites trade barriers may still apply when selling over the internet

Question 38

Glocalisation

Answer 38

in order to sell to international markets businesses often have to change their products this is so they can adapt to other countries cultural differences, taste and legal requirements

Question 39

How can a business change its PRODUCT to compete internationally?

Answer 39

change technological components (e.g sockets) change taste to meet cultural preferences change components to meet safety regulations

Question 40

How can a business change its PRICE to compete internationally?

Answer 40

change price to consider tariffs comply with different tax laws account for currency conversion account for income in foreign countries

Question 41

How can a business change its PLACE to compete internationally?

Answer 41

change location of products in line with local preferences (e.g what shops people visit and what time they shop)

Question 42

How can a business change its PROMOTION to compete internationally?

Answer 42

revise advertising campaigns to take into account the fact that meanings of colours, gestures and phrases are different in different countries