2.1 - growing the business

Question 1

methods of internal/organic growth

Answer 1

• innovating new products, further R+D
• enter new markets (change market mic, use technology, expand overseas)

Question 2

methods of external/inorganic growth

Answer 2

• merger (two or more business join up)
• takeover (one business buys another)

Question 3

advantages of PLC

Answer 3

• can raise finance easily through share capital
• limited liability
• considered more prestigious/reliable
• negotiate better prices with suppliers
• good public awareness of business

Question 4

why is business growth important

Answer 4

• helps increase market share
• lower costs
• more profit

Question 5

disadvantages of PLC

Answer 5

• complex accounting and reporting
• potential takeover by shareholders
• more media attention
• financial records published
• external shareholders also have influence on decisions

Question 6

methods of external growth

Answer 6

• backward vertical (business joins with production at a previous stage)
• conglomerate (joins business with no correlation)
• forward vertical (business joins with production at a later stage)
• horizontal (business at same stage join)

Question 7

internal sources of finance

Answer 7

• retained profit (no risk, but profit is not guaranteed)
• selling assets (raises capital easily, but business loses assets)

Question 8

external sources of finance

Answer 8

• loan capital (long term loan, interest)
• share capital (raise large amount of capital, but risk takeover) —> stock market flotation for PLCs when business issue shares for sale on the stock exchange

Question 9

why do business aims/objectives change

Answer 9

external
- competition
- technology (possible invention of new products)
- market conditions (economic climate/demand changes)
- legislation (may restrict future plans OR open new opportunities)
internal
- performance
- leadership
- culture

Question 10

how business aims/objectives change

Answer 10

growing vs struggling businesses
- growth vs survival
- enter vs exit markets
- increase vs maintain sales (to break even)
- gain vs maintain market share
- growing vs residing workforce (affects cost)
- increasing vs decreasing product range

Question 11

retrenchment

Answer 11

when a business downsizes the scale of its operations (e.g. decreasing product range, closing stores)

Question 12

3 impacts of globalisation

Answer 12

• imports (can import raw materials from other places that are cheaper than if produced in UK. However, increases competition for foreign businesses that can sell directly to their customers)
• exports (opens up international markets for businesses, potential for growth. However, new markets are very different and business may struggle if they lack expertise/knowledge prior)
• location (relocate operations to other countries. Lead to lower labour costs, or close to raw materials, or closer to market)

Question 13

benefits of globalisation

Answer 13

• new market opportunities
• access to new technology and resources

Question 14

drawbacks of globalisation

Answer 14

• threat from foreign competitors
• challenge of adapting products to suit foreign market

Question 15

barriers to trade

Answer 15

• tariffs
• quotas (physical limits on imports)
• trade blocs
• subsidies (money given to help domestic producers)

Question 16

why are trade barriers needed

Answer 16

• protect domestic industries
• prevent dumping of cheap goods on domestic market
• raising revenue from tariffs

Question 17

how can business reduce their environmental impact?

Answer 17

• use renewable energy
• use biodegradable packaging
• reduce food miles