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[archive] business > 2.1 | Growing the business > Flashcards

2.1 | Growing the business Flashcards

1
Q

define organic growth

A

When a business grows by expanding internally by its own activities

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2
Q

give 4 methods of organic growth

A
  • targeting new markets
  • developing new products
  • franchising
  • e-commerce
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3
Q

give three ways a business targets new markets and an impact of each

A
  • e-commerce: to increase exposure and sales
  • new machinery allows for economies of scale as items are cheaper to produce so firms can lower prices and target lower income markets
  • set up branches in other countries and adapting the marketing mix ( promotion/ price) to appeal to new consumers
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4
Q

give two ways a business can develop new products and an impact of each

A
  • by conducting research and development resulting in innovation ( a new product)
  • expanding product portfolio which targets a larger range of customers and increase sales
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5
Q

give two advantages and 1 disadvantages of organic growth

A
  • Less disruptive changes mean workers’ efficiency, productivity & morale remain high
  • Less risk - expanding by doing what the business is good at
    disadvantages:
  • slow growth as it can take time to adapt to changes in the market
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6
Q

define inorganic growth

A

when a business expands externally by joining with another business

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7
Q

give two methods of inorganic growth and define them

A
  • merger: when two businesses join to form a new but larger business
  • takeover: occurs when an existing business expands by buying more than half the shares of another business.
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8
Q

give 3 ways a business can merge with others and an advantage of each

A
  1. join with a supplier:
    - allows a firm to control supply, cost and quality
  2. join with a competitor:
    - bigger market share
  3. join with an unrelated firm:
    - diversifying into new markets as well as reducing risk
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9
Q

Give two disadvantages of inorganic growth

A

disadvantages:

  • management styles differ leading to lower motivation and slower integration for workers
  • leads to cost cutting and high redundancy rates leading to tension and uncertainty among workers
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10
Q

Define economies of scale and two ways it can be done

A

When a business’ output levels increase and so its average cost per item produced is cheaper

  • advanced machinery
  • bulk buying
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11
Q

give 3 impacts of economies of scale (1N+2P)

A
  • makes more profit on each item
  • lower manufacturing costs thus lower prices attracting more customers
  • needs more warehouse space leading to higher fixed costs
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12
Q

define diseconomies of scale

A

when a business grows beyond its capacity for management and so cost of production increases

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13
Q

give two ways diseconomies of scale occurs and its disadvantages

A
  • the bigger the firm, the harder and more expensive it is to manage
  • production process becomes more complex leading to slower decision making and lower productivity
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14
Q

give two internal sources of finance and define them

A

retained profits: profits that are reinvested in the business rather than being issued as dividends
fixed assets: firms can sell unwanted assets to raise cash

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15
Q

define dividends

A

a share of the profits paid to shareholders

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16
Q

give an advantage and disadvantage of retained profit

A
  • quick and convenient as there is easy access to money
    cons:
  • when used, it is not available for any future unforeseen problems the business might face
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17
Q

give two advantages and disadvantages of selling fixed assets

A
  • convenient and quick
  • can create space for more profitable assets
    cons:
  • the business might not get the full market value of the assets or be able to sell them
    the business may need the assets in the future
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18
Q

define internal and external sources of finance

A

internal: Capital found from within a business
external: capital found from outside a business

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19
Q

give two external sources of finance

A
  • loan capital

- share capital

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20
Q

define share capital

A

money raised when a business becomes a private limited company by selling shares in return for capital.

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21
Q

give two advantages of share capital

A
  • does not have to be repaid and no interest is applied

- a business can choose to whom it offers shares

22
Q

give two disadvantages of share capital

A
  • control of the business is diluted

- business is vulnerable to takeover

23
Q

define loan capital

A

a lump sum of capital borrowed from a bank and paid back in instalments with interest.

24
Q

give two advantages of loan capital

A
  • easy and quick to access for established businesses

- can get a significant amount of money at one time

25
Q

give two disadvantages of loan capital

A
  • high levels of interest can increase costs

- banks may also ask for collateral (security) in case the business fails to make repayments

26
Q

define stock market flotation

A

money raised when a business becomes a PLC by selling shares on the stock market ( to the public )

27
Q

give two advantages of stock market flotation ( SMF)

A
  • the shares don’t have to be repaid and no interest is applied
  • the business can gain recognition
28
Q

give two disadvantages of stock market flotation

A
  • there is risk of losing control

- dividends have to be paid and business records are made public

29
Q

what is a PLC?

A

a company which sells shares on the stock market. Public Limited Company

30
Q

give three advantages of being a PLC

A
  • ability to raise large additional finance through share capital and SMF
  • the shareholders have limited liability
  • the company can expand and diversify reaching economies of scale
31
Q

give two disadvantages of being a PLC

A
  • greater risk of a hostile takeover

- large amounts of profit must be shared with shareholders

32
Q

define globalisation

A
  • when companies operate internationally or on a global scale
33
Q

define international trade

A

The process of buying from and selling to overseas countries

34
Q

define imports

A

purchasing goods or services overseas and bringing them into another country

35
Q

give two impacts of globalisation on imports ( N + P )

A
  • firms have a larger market to buy from therefore being able to buy supplies more cheaply thus reducing costs and increase profits
  • more competition thus more demand for cheaper products therefore the firm must lower prices to stay competitive
  • less market share
36
Q

give two impacts of globalisation on exports

A
  • larger market to sell to abroad thus increasing sales and profits
  • if the value of the pound is strong British firms that export products will have less sales as they may increase prices lowering customer appeal
37
Q

give 2 advantages of globalisation on a business’ locations

A

p:

  • easier to set up a business abroad reducing costs through transport ( by locating near raw materials or where labour is cheaper ( pay lower wages)
  • increases brand awareness and product range due to a larger market
38
Q

what is a multinational company and an impact on firms ?

A
  • companies that operate in a number of countries around the world.
  • increases competition
39
Q

define the two barriers to trade

A

tariff- a tax on imports or exports of goods

trading blocs: a group of countries that work together to provide special deals for trading ie. without tariffs

40
Q

give two impacts of tariffs n+p

A

p:
- domestic firms can stay competitive
c:
- more expensive to import goods

41
Q

give two impacts of trading blocs

A

p:
promotes free trade without tariffs and quotas decreasing costs for a business
c:
Importing and exporting to countries outside the trading bloc can be expensive

42
Q

give two ways a business can change to compete internationally

A
  • use e-commerce by setting up websites

- change their marketing mix

43
Q

give 3 advantages to e-commerce

A
  • cheap to operate compared to physical stores
  • reach wider markets and overseas customers
  • access to cost-effective promotional methods like social media
44
Q

give two ways a business can adapt the marketing mix to remain competitive abroad

A
  • product: adapt their product to fit dietary requirements or cultural beliefs in one country
  • price: may increase or decrease due to barriers to trade or varying income levels
45
Q

give three ways a business can act more ethically and environmentally friendly

A
  • pay fair wages and provide good working conditions
  • use less packaging and recycle more
  • use non toxic materials and not harm animals through animal testing
46
Q

give three advantages to a business of acting ethically ( ways a business can do this then impact)

A
  • consumers are more willing to pay a higher price as they place a high value on such products
  • allows one to develop a good relationship with supplier if treated fairly and may offer you better payment terms
  • by paying fair wages employees are more motivated to work and less likely to leave reducing recruitment and training costs
47
Q

Give three disadvantages of a business acting ethically

A
  • higher labour costs to maintain good working conditions and pay wages
  • it is more difficult to find ethically sourced materials and its suppliers therefore higher costs - increased price- deter customers
  • if the firm claims to be ethical but is not , it can damage brand reputation making investors more reluctant to associate with the firm
48
Q

give three ways businesses contribute to climate change and how to change that

A
  • producing waste that ends up in landfills leading to pollution : reduce waste
  • produce noise and air pollution through factory work etc: reduce fossil fuel use
  • act more sustainably through recycling or more efficient machinery
49
Q

Give three advantages of a business acting environmentally friendly

A
  • a green image can improve corporate image attracting customers and increasing sales
  • a competitive advantage allows a firm to charge higher prices
  • can reduce costs by reducing waste and reusing resources
50
Q

Give two disadvantages of a business acting in an environmentally friendly way

A
  • increase costs as it requires investment in sustainable production methods and raw materials
  • greenwashing can harm business reputation and deter customers
51
Q

define pressure groups and two things they do

A
  • groups that try to influence the decisions made by businesses
  • protests and ‘ boycotting’ a business
52
Q

give two impacts of pressure group activity on the marketing mix

A
  • product : change the product to use sustainable materials

- place: change distribution methods by using delivery vehicles that pollute less

[archive] business (13 decks)

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