2.1 Flashcards
What is internal (organic growth) and what are the examples of this?
Internal growth is when a business grows by expanding on its own without mergers or takeovers from other businesses.
New products
Innovation
Research
Development
New markets
Through changing the marketing mix
Taking advantage of technology
Expanding overseas
What is external (inorganic growth) and what are the examples of this?
When a business combines with another to grow.
Takeover: When one business joins another
Merger: When two ore more businesses join together
What are the advantages and disadvantages of a business going through organic (rather than inorganic) growth?
PROS:
A business that grows from within can retain their own company culture
Higher production means the business can benefit from economies of scale and lower average costs
More influence comes with more market share, the business can start setting prices for the industry
CONS:
This is a very high risk strategy, opening lots of stores or taking on new staff is very risky
Long period between investment and return on investment
Growth may be limited and is dependent on reliability of sales forecasts
Describe how economies of scale work.
When your costs decrease due to larger levels of production:
More products being produced means more materials being ordered more regulalry
Bulk orders reduce price
Variable cost per unit reduced
What is an internal source of finance and what are examples of this?
capital gained within a business.
Retained Profit
Selling Assets
Personal Savings
What is an external source of finance and what are examples of this
Capital gained outside a business.
Loan capital
Share capital
Stock market floatation
What are the pros and cons of loan capital?
PROS:
Improve cash flow
Financial advice
CONS:
Time for approval
Interest
Expensive
Collateral
What are the pros and cons of share capital?
PROS:
Large amounts of capital
No interest
Does not need to be repaid
CONS:
Loss of control
What is a public limited company?
When a private limited company (a business owned by its shareholders) makes shares available to the public to purchase. This process is stock market floatation
What are the pros and cons of stock market floatation?
PROS:
Large amounts of capital
No interest
Does not need to be repaid
CONS:
Loss of control (As all the shareholders vote on desicions)
What might business aims and objectives change in response to?
Market conditions
Technology
Legislation
Growth
Consumer taste
As a business evolves, how would its focus on survival or growth alter?
It would be less focused on survival as it starts to pass the break even point. Once it starts to make a profit, growth will be the preferred choice.
As a business evolves, how would its focus on entering or exiting markets alter?
It will change the markets it is in. For example it may:
Enter new markets so that the business is growing by venturing in new areas
Exit markets if they see that they aren’t making enough sales in that area
As a business evolves, would it be growing or reducing the workforce?
It may decide to:
Grow the workforce so that the business can have a higher production rate
Reduce the workforce if it has become more reliant on technology that they’ve aquired through growth
As a business evolves, would it be increasing or decreasing its product range?
-likely to introduce more innovative products to its range
-having a broader product protfolio helps a business spread the risk of loss of revenue
-builds brand loyalty by encouraging customers to come back again for new or varied products
-increasing product range allows a business to use its promotional budgets more effectivley
-may remove products if its no longer in demand, obsolete
How would market conditions effect business objectives?
-includes the size of the market and degree of competition
-environment will change as other businesses enter and leave the market
-if new competition enter the market they may need to focus on survival
How would legislation effect business objectives?
-how they treat their employees or promote their products
-introduction of national living wage may affect an objective of profit maximisation or growth
What are the advantages and disadvantages of globalisation?
AD:
-new market oppertunities
-access to tech and resources
DD:
-threat from foreign competition
-challnge of adapting products and service to meet the needs of foreign customers
What is Globalisation?
when a business operates on an international scale and gain international influence or power
What are imports and exports?
imports: flow of goods and services into one country from another
exports: flow of goods and services out of one country to another
What is a multinational company?
large company with facilities and markets around the world. they are powerful businesses that can create lots of jobs and growth when they enter a country. However smaller local buisness can lose out esp in LEDCs
how would technology effect business objectives
-offers opertunities and threats
-if a business spots and oppertunity to use new technology to introduce an innovative product into the market, it would change its objectives to focus on product development
-alternativley, a buisness may set an objective to enter nerw market using e-commerce or an objective to minimise its costs by using new tech in production process
how would performance effect business objectives
-a business may reveiw and amend its aims and objects based off performace
-financial performance: profit and cash flow
-non financial performance: market share or productivity of workforce
retrenchment
when a business downsizes the scale of its operations by reducing number of employess or closing less profitable branches
globalization effect on imports
import raw materials and products at lower prices. importning increases competition from forein businesses that are able to sell directly
globalization effect on exports
-opens up new international markets for businesses and gives them the potential to grow
-however, operating in international markets can be very diff then operating in the UK, may face problems if they lack expertise or knowledge
globalisation effect on location
-brings oppertunity to relocate operations to another country
-benefit from lower labpur costs, to be closer to raw materials or to be closer to the markets which they sell their products to
What are tarrifs?
taxes on imports
what are Trade Blocs and some common examples?
-barrier to international trade
-created when the governments or diff countries agree to act together to promote trade among themselves
protectionist measures
-an action taken by a government to reduce the flow of imports into the country
using internet and e-commerce
-allows business to communicate with existing and potential customers around the world through social media and websites
-form of promotion, competitive advantage by allowing them to build brand loyalty
-allows to trade 24/7
-access to global marketplace where they can sell and purchase goods and services
change their marketing mix to compete internationally
-product:
change technological components (sockets)
change taste to meet culrutal preferences
change components to meet safety regulations
-price:
consider tariffs
-comply with diff tax laws
-account fot currency conversion
-account for incomes in foreign countries
-place:
change location of products in line with local preferences
-promotion:
-revise advertising campaigns to take into account the meaning of colors, gestures and phrases are diff in diff countries
What are ethics in terms of business?
moral principles that guide behaviours of individuals and businesses. when making decisions buisnesses must consider the impact they have on shareholders
What is a trade-off?
when something is given up in order to gain or achieve smth else
-businesses must balance their drive for profit with their ethical principles
-paying higher wages and usng ethical suppliers can raise costs and lower profits, however acting ethically can appeal customers
What is a pressure group and what actions do they take?
-organisation that try to make businesses change their behaviour or opertaions
-pressure groups focus on issues such as animal rights, workers rights, the environment and world poverty
-pressure groups can causes bad publicty for businesses that work unethically
impact of pressure groups on promotion
provide accurate info on packaging
obey advertising laws
impact of pressure groups on price
increase the price paid to small suppliers
pay suppliers fair prices where there is limited competition for suppliers
impact of pressure groups on place
source local products
impact of pressure groups on product
-use sustainable resources
-ensure all products are safe
business impact on environmemt short term and long term
short term:
-traffic congestion from deliveries and transport
-air, noise and water pollution through manufacturing and industry
long term:
-climate change
-depletion of land, food and natural resources
reducing impact on environment
-using renewable energy
-replenishing and conserving natural resources
-using biodegradable packaging
-reducing food miles
-partaking in social enterprises
