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Business- Theme 2 > 2.1 Growing The Business > Flashcards

2.1 Growing The Business Flashcards

1
Q

When does internal growth happen in a business?

A

When a business expands by itself, by bringing out new products/ entering new markets

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2
Q

What are 2 common methods of internal growth?

A
  • Introducing new products

- Entering a new market

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3
Q

What are the disadvantages of research and development?

A
  • Takes time
  • Can be expensive
  • Does not always succeed
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4
Q

What does entering new markets mean?

A

Selling existing products to a group of new people

- Technology can help them reach new markets- abroad as well ( risky as they don’t know needs and wants)

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5
Q

What are 2 common methods of external growth?

A
  • Merges

- Takeovers

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6
Q

What is a merger?

A

When 2 or more businesses join together and operate as a combined business

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7
Q

What are takeovers?

A

When one business takes complete control of another business

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8
Q

What are the advantages of being a Public limited company?

A
  • Ability to raise additional finance
  • Limited Liability
  • Seen as more prestigious
  • May be able to negotiate better prices with suppliers
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9
Q

What are the disadvantages of being a Public limited company?

A
  • Risk of hostile takeovers
  • Increased media attention
  • More complex accounting
  • Less privacy in relation to financial performance
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10
Q

What is a multinational business?

A

A business that operates in more than one country

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11
Q

What are the advantages of being a multinational business?

A
  • Wider target market
  • Ability to take advantage of cheaper labour and utilities abroad
  • Can spread risk between operations
  • Reputation as market leader
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12
Q

What are the disadvantages of being a multinational business?

A
  • Loss of focus on key markets
  • Cultural and language differences between countries
  • Uncertainty regarding profit based on exchange rates that change on a regular basis
  • Potential damage to reputation if found operating unethically
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13
Q

What are the 2 different types of internal source of finance?

A
  • Retained profit

- Selling assets

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14
Q

What are the advantages + disadvantages of retained profit?

A

No need to repay finance and there are no interest charges, however there the amount available is limited

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15
Q

What are the advantages and disadvantages of selling assets?

A

Provides the business with an immediate sum of money, but business loses the assets (investment). It’s fine if the business doesn’t need the assets anymore but can be expensive if the business needs it later on to lease or pay back the assets

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16
Q

What are the 2 types of external sources of finance

A
  • Loan capital

- Share capital

17
Q

What is loan capital?

A

-Finance borrowed from a financial institution such as a bank. -Money has to repaid over a period of time with interest

18
Q

What is share capital?

A

Finance raised by selling a percentage of the business to external investors- think of venture capitalist like them

19
Q

What is stock market floatation?

A

The process of changing a business to a public limited company

20
Q

What is the stock exchange?

A

A place where shares in PLC’s can be bought and sold

21
Q

Why business aims and objectives change as businesses evolve?

A

It changes in response to:

  • Market conditions
  • Technology
  • Performance
  • Legislation
  • Internal reasons
22
Q

What is market conditions and how does that impact the business?

A
  • Includes size of market + degree of competition
  • Environment will change if businesses enter or leave the market
  • Thus business has to re think there aims in order to match the market
23
Q

How does technology affect the business?

A
  • Tech is constantly changing

- Offers opportunities and poses threats to a business

24
Q

How does performance affect a business?

A
  • Business may amend it’s aims + objectives depending on it’s performances
  • Financial performance( profits etc.)
  • Non - financial performance( productivity of workers)
25
Q

How does legislation affect a business?

A
  • Legislation= laws that determine how a business operates

- Business must abide by these laws

26
Q

How does internal changes affect a business?

A

Culture of organisation and attitude of workers can change how the business operates

27
Q

What is retrenchment?

A

When a business downsizes the scale of it’s operations by reducing the number of employees

28
Q

What things would change when a business grows and evolves?

A
  • New employees
  • May increase or reduce size of operations
  • Change the marketing mix aspect
  • May make a product portfolio

Business- Theme 2 (11 decks)

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