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business studies > 2.1 Growing the business > Flashcards

2.1 Growing the business Flashcards

1
Q

Definition and methods of internal growth.

A

Internal growth is when the business grows by itself.

  • Entering new markets: changing the marketing mix to find new markets.
  • New products: High risk innovation through research and development.
  • New Technology: developing new technology or investing in new tech.
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2
Q

Definition and methods of external growth.

A

External growth is when a business expands by joining with another business.
Merger- when two or more businesses voluntarily agree to join.
Takeover- when business take complete control over another by buying it.

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3
Q

What are the different stages of production when mergers and takeovers can happen.

A

Backward vertical- business joins with another one at a previous stage
Forward vertical- business joins with one at a later stage
Conglomerate- business with no common interests join
Horizontal- Businesses at the same stage join.

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4
Q

Definition of a PLC, and evaluate this method of ownership.

A

PLCs can raise capital by selling shares on a stock exchange.

ADS:

  • easy to raise additional finance through share capital
  • Limited liability
  • seen prestigious and reliable.
  • Able to negotiate better prices with suppliers.

DIS:

  • Complex accounting and reporting procedures.
  • Risk of hostile takeovers.
  • less privacy of financial info.
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5
Q

What is a stock market flotation?

A

Where a business issues shares for sale on the stock exchange.

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6
Q

Definition of a multinational company and evaluate this ownership.

A

A business with operations in more than one country.

ADS:
-Wider target market
-can take advantage of cheaper labour abroad.
-Bigger market share + reputation
- seen as being well establishes
DIS:
-Can result in a loss of focus on key markets
-May have to adapt products to cultural diffs etc
-uncertainty regarding exchange rates
-Reputation can be damaged easily

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7
Q

Internal sources of finance

A

Selling assets and retained profit

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8
Q

Evaluate selling assets as a source of finance

A

ads:

  • A quick way of raising capital
  • no repayment
  • no interest etc

dis:

  • may need the asset later on
  • the asset may not be worth so much as it may be used .
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9
Q

Evaluate retained profit as a source of finance

A

ADS:

  • safe and secure form of finance, doesn’t involve a big risk.
  • no repayment required
  • Doesn’t dilute the ownership of the business
  • Flexible amount

DIS:

  • The profit may not be a substantial amount/
  • Could result in smaller dividends.
  • can result in lower financial security later on
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10
Q

External sources of finance.

A
  • Loan capital

- Share capital

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11
Q

Evaluate the use of loan capital

A

ADS:
-The business is guaranteed the money
-The finance is secure
DIS;
- needs to be paid back in a specific period of time.
- loan needs to be paid back with interest.
-lack of flexibility

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12
Q

Evaluate the use of share capital.

A

ADS:

  • Flexible, the business controls how much money they gain through selling shares.
  • no repayment

DIS:

  • Risk of shareholders taking over
  • shareholders are entitled to a share of the profits through dividends.
  • only limited companies can raise share capital.
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13
Q

Why do business objectives change.

A

Market conditions, as the economic climate may change the level of demand and spending, this can influence the ambitions of the business.
- a competitor may enter or leave the market

Technology, e.g new tech can aid the development of new products, or it can pose threats to a business as the invention of new tech may outcompete the products.

Performance, business may review its aims considering current performance, setting higher targets etc.Or a new CEO could result in better leadership.

Legislation, new laws can change business operations, or they can create new opportunities.

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14
Q

How do objectives change for a growing business?

A
  • expanding product range (broader product portfolio)
  • new markets
  • higher market share or profits
  • taking over other businesses
  • increasing workforce–>change in organisational structure.
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15
Q

How do objectives change for a struggling business?

A
  • achieving enough sales to break even
  • improving efficiency
  • maintaining market share
  • Retrenchment, i.e when a business downsizes the scale of its operations.
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16
Q

The impact of globalisation?

A

ADS:

  • Imports can be cheaper than producing the products domestically.
  • money flows into the economy through exports, business becomes multinational–> wider market
  • business can locate to other countries where the labour force is cheaper and raw materials are closer.

dis:

  • Creates competition domestically, can lead to changes in demands for products.
  • Business will have to adapt products to meet international needs.
  • Entering new markets is a huge risk.
17
Q

What is protectionism?

A

When countries restrict the flow of imports into their country.

18
Q

What are the barriers to international trade?

A
  • Tariffs
  • Trading bloc give preference to countries within the bloc.
  • Quotas on specific imports
  • Subsidies(money given to encourage domestic producers)
19
Q

How do businesses use e-commerce to compete internationally?

A
  • trading happens globally, 24/7.

- they can promote their business through social media.

20
Q

How do businesses change their marketing mix to compete internationally?

A

Product: changing taste or lang to meet cultural preferences, changing product to meet the safety regulations.

Price: account for the incomes in diff countries, the currency conversions.

Place: cultural diffs, e.g if ppl shop online of in shops.

Promotions: changing the language of advertisements.

21
Q

What are ethics?

A

Ethics are the moral principals that guide the behaviours of individuals.

22
Q

How is there a trade-off between profit and ethics?

A
  • Paying higher for ethically sourced raw materials can lower profits.
  • acting ethically can increase sales and increase profits
  • ethical-better reputation-motivated employees
23
Q

pressure groups

A

organisations that influence a business’ operations by trying to make them more ethical

24
Q

The impact of pressure groups on the marketing mix

A

Business may have to remove a product from its range due to its unethical components.
Business might high to increase pricing because the products are more ethically sourced.
Not opening stores in specific locations due to local campaigns.
Sourcing local raw materials to decrease carbon footprint.
Making packaging recyclable and biodegradable with honest information on it.
Obeying the legislation.

25
Q

How does a pressure group affect the business behaving unethically?

A
  • boycott
  • viral marketing
  • public protests
  • lobbying

business studies (10 decks)

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