1.7 - expanding a business

Question 1

internal/organic growth

Answer 1

gets bigger by selling more products

Question 2

franchisee

Answer 2

buys a franchise

Question 3

external growth [ intergration ]

Answer 3

when firms join together

Question 4

franchisor

Answer 4

sells a franchise

Question 5

merger

Answer 5

when 2 or more firms join together and create a joint business

Question 6

market capitalisation

Answer 6

measures the value of all business shares

Question 7

e-commerce

Answer 7

buying or selling a product using an electronic system

Question 8

takeover

Answer 8

when a franchisor sells the rights to it’s products to a franchisee

Question 9

outsourcing

Answer 9

when a business uses another business to produce for it

Question 10

the bigger the business the… - 3

Answer 10

• more market shares gained
• better know to customers and other stakeholders
• the safer it is from takeovers

Question 11

how to measure the size of a business - 4

Answer 11

• value of sales
• market shares
• value of the business
• market capitalisation

Question 12

market capitalisation calculation

Answer 12

market price of shares x the number of shares

Question 13

selling a franchise advantages - 3

Answer 13

• can grow quickly
• franchisee provides some finance
• franchisees motivated for running their own business

Question 14

selling a franchise disadvantages - 3

Answer 14

• lose some control
• danger of problems with one franchise affecting whole brands
• have to share profits

Question 15

buying a franchise advantages - 4

Answer 15

• established brands
• access to training and supplies
• share marketing costs
• learn form other franchises

Question 16

buying a franchise disadvantages - 2

Answer 16

• have to share profits
• may have to work with franchisor’s guiudline’s

Question 17

negatives of e-commerce - 2

Answer 17

• distributing products to customers
• make physical stores close down

Question 18

horizontal intergration

Answer 18

one firm joins another that’s at the same stage of production process

Question 19

vertical intergration

Answer 19

one firm joins another at a different stage of the same production process

Question 20

backward vertical intergration

Answer 20

when a firm joins with its suppliers

Question 21

forward vertical intergration

Answer 21

when a firm joins with its distributors

Question 22

conglomerate intergration

Answer 22

one firm joins another in a different type of production process

Question 23

economies of sales

Answer 23

when a business’s unit costs of production fall , as its output rises and the business expands

Question 24

diseconomies of sales

Answer 24

when a cost per unit increases as a business expands

Question 25

advantages of business expansion - 4

Answer 25

• it can lead to economies of sales
• more power in market
• more status
• makes it more expensive to be taken over making it safer

Question 26

disadvantages of business expansion - 4

Answer 26

• decision making lowers
• employees feel isolated
• controlling and coordinating products will become difficult
• can lead to diseconomies of scale

Question 27

2 main economies of scale

Answer 27

• purchasing : buying bulk to negotiate lower prices
• technical : large scale production enables a business to make efficient use of technology

Question 28

unit cost calculation

Answer 28

total cost/output