2.1 Flashcards
2.1: Internal - organic growth and why
New markets
new products
new technology
helps to:
increase market share
lower costs
results in more profit
2.1: advantages and disadvantages of internal growth
+ cheaper: financed through retained profits
+ less risky: no culture clash
+ keep control
- pace of growth is slower
- might miss out on tapping into skills and expertise of other businesses
2.1: External inorganic growth
merger
takeover: buy shares
2.1: advantages and disadvantages of external growth
+ demand will be increasing so right time to grow.
+ quicker
+ combined business benefits from shared resources and skills.
- Difficult to integrate two businesses together
- can be expensive
2.1: what is a PLC?
Public limited companies
raise capital through selling shares on a stock exchange.
private limited companies can become a PLC through stock market flotation
2.1: MNC
Multi national companies
a business which operates in more than one country.
+ wider target market
+ take advantage of cheap labour
+ spreads risk
- culture and language barrier
- can damage reputation if unethical
2.1: Sources of finance for PLC
Internal:
sales of assets: cheap and easy but may require later.
retained profit: cheap but cannot be used elsewhere
external:
loan: get instantly but have to repay with interest
share capital: can lead to takeober
2.1: changes in business aims
Internal
- culture
- change in leadership
- performance
external
- technology
- legislation
- market conditions
2.1: targets for a growing business
enter new markets
expand product variety
increase sales
increase market share
improved workforce
open new stores
2.1: targets for a struggling business
exit from markets
decrease product variety
aim for break even
improve efficiency
maintain market share
reduce costs
2.1: international trade
the flow of goods and services between countries.
importing and exporting
2.1: import and export definition
import - a good brought into the country (money leaving UK)
export - a good exiting the country (money entering UK)
2.1: globalisation definition
the increasing number of businesses that are operating on an international scale
2.1: proctectionalism
3 ways the government protects the businesses in their country.
- Tariffs: tax that raises prices of imported goods
- Quotas: a physical limit on the number of imports
- Export subsidy: government gives businesses money to help them.
2.1: benefits to UK businesses
- greater number of customers to sell in new markets
- lower costs of production in developing countries (cheap labour)
