✅ 1.6 - 1.7 Business Plans & Expansion Flashcards
What is the purpose of a business plan?
The purpose of a business plan is to outline what a business will do and how it plans to achieve its aims and objectives
Give the 4 reasons why businesses create business plans
Businesses create business plans because:
- It is important for setting up a new business as it helps the owner to clarify their thoughts and plans as well as allowing them to think about the business in depth to minimise risks
- It helps a business to raise finance as it provides detailed information about renenue and costs, which can be used to convince potential investors that it is a good investment
- It helps to decide what objectives need to be set in order to achive their aim(s)
- To detail how the functions of a business will be organised, so that it can run more efficiently
What are the main sections of a business plan?
- Personal details of the owner and other important personnel, like their CVs, as financial backers will want to know who they are trusting their money with
- Mission statement - A broad way of saying what the company wants to achieve
- Objectives which are more specific than aims
- Product Description - Describes which products and services the business sells, what its USP is, as well as details of the market and competitors
- Production Details which include how the business will make its product or services. It also includes the equipment needed and the location of the factories
- Staffing Requirements - Which includes how many people are needed, their job decriptions and their expected wage bill
- Finance - (EXPAND LATER)
What are two drawbacks of business planning?
- Business plans may prevent or obstruct a business from being flexible and able to adapt to a changing environment or unexpected circumstances
- It can be time consuming and costly
What is another term for internal growth?
Organic growth
What is internal expansion?
Internal expansion is when a business grows by expanding its own operations
Give the benefits and drawbacks of internal expansion?
- Internal expansion is relatively inexpensive
- It is less riskier as the business just has to do more of what it is already good at
- It is a slower route to expansion than external expansion
- Return on investment can take a long time
List 3 methods of organic growth
- E-commerce
- Opening New Stores
- Outsourcing
- Franchising
Define Outsourcing
Outsourcing is when a business pays another firm to carry out tasks it could do itself
Give one benefit and drawback of outsourcing as a method of expansion?
+ Saves time
- The business might lose some control over parts of its operation
Give one benefit and drawback to opening new stores as a method of expansion?
- It is a fairly low risk, as if it operates in a similar way to the existing store, it should be a success
- Opening a new store means more costs (rent & staff), so a business needs to be prepared to afford these costs
Give one benefit and drawback of using e-commerce as a method of expansion?
- Business has access to a larger market
- Technical problems can cause customers to be unsatisfied
What is franchising?
GFranchising is when a company (the franchisor) sells the rights to sell its products and use its trademarks to others firms (franchisees) in return for a fixed fee and/or a percentage of profits in return
What are three advantages of franchising?
- Increases a franchisor’s income as it gets money from the franchisee
- Franchising increases the market share and brand awareness of a firm’s product
- The business can expand cheaply as it is does not incur the costs of opening a new store
What are two disadvantages of franchising?
- The franchisor does not have complete control over how the franchisee operates
- If a franchisee has poor standards, then it can damage the reputation of the franchisor
