2.1.1 Business Growth

Question 1

Name 2 Methods That Help Business Expand?

Answer 1

• 1) Internal (Organic) Growth
• 2) External (Integration) Growth

Question 2

Describe What Is Internal Growth?

Answer 2

• Its when a business decides to expand its own activities by launching new
  products
  and entering new markets Its also when a business sells more products in their existing market.

Question 3

What does Launching new products and enter new markets require?

Answer 3

• It requires innovation and development and the business may have to change their marketing mix and increases spending on promotion and advertising.

Question 4

Name 4 Other ways businesses would expand?

Answer 4

• 1) Open new stores Nationally.
• 2) Expand overseas.
• 3) Selling online.
• 4) Selling franchise rights.

Question 5

Name 2 Reasons why Business Owners Would Want to Expand?

Answer 5

• 1) Higher Profit for Shareholders.
• 2) Increase their Market Share.

Question 6

Name 3 Reasons Why Some Business don’t Expand?

Answer 6

• 1) Some business might want to stay in a niche market.
• 2) Growing a business needs lots of capital.
• 3) some business owners might not want their business to become multinational.

Question 7

Write a Definition of a Monopoly?

Answer 7

• A Monopoly is when a business controls a large percentage of the market. It is also when a business has total control over the supply of a particular product.

Question 8

Write a Definition of a Oligopoly?

Answer 8

• A Oligopoly is when a Small number of companies dominate the market between them

Question 9

What can a Larger Company achieve?

Answer 9

• A Larger company can achieve a bigger market share and provide more profits to its shareholders.

Question 10

Name the 3 Types of Internal Sources of Finance?

Answer 10

• 1) Retained Profit.
• 2) Selling Assets.
• 3) Personal Savings.

Question 11

Name 3 Types Of External Sources of Finance?

Answer 11

• 1) Loan Capital
• 2) Share Capital
• 3) Stock Market Flotation

Question 12

Name 2 Methods of External?

Answer 12

• 1) Takeover - Where 1 Company Takeovers Another.
• 2) Merger - where 2 companies combine to become 1.

Question 13

Name the 3 Business Integration and What Does Each One Mean?

Answer 13

• 1) Horizontal- A Business Joins a Business at Some Stage of the Production Process.
• 2) Vertical - A Business That Joins With Its Suppliers.
• 3) Conglomerate - A Business That Joins Another Business in a Different Market.

Question 14

Write a Definition of Forwards vertical integration?

Answer 14

• Forward vertical integration is a strategy where a company takes control of distribution or retail channels to move closer to the end For example a farmer and a dairy milk Distributor.

Question 15

Name 3 Reasons Why business merge with rivals?

Answer 15

• 1) To take advantage of the cost saving.
• 2) Increases market share.
• 3) and Eliminate rivals.

Question 16

Name the 3 Types of Horizontal sector?

Answer 16

• 1) Primary sector - When raw materials are extracted from the ground.
• 2) Secondary sector - When goods are manufactured
• 3) Tertiary sector - Which provided services.

Question 17

Name 4 Ways That Business Expand Internally?

Answer 17

• 1) When The Business Employs More People.
• 2) When The Business Opens More Branches.
• 3) When The Sales Or Revenue Increases.
• 4)When The Profits Increases.

Question 18

Write a Definition of a Public limited company and write a example of a public limited company?

Answer 18

• A Public Limited company is a company that commonly offers its shares to the general public via the stock exchange.
• Ford is a example of a public limited company.

Question 19

What do plcs have in common and What can it issue?

Answer 19

• plcs all have limited liability.
• And can issue shares to potential owners.

Question 20

Write a Definition of shares and shareholders?

Answer 20

• Shares are equal parts of ownerships.
• A Shareholder is someone who owns 1 share in the business.

Question 21

Give a Benefit Of Internal/Organic Growth (3 Marker)?

Answer 21

One Benefit of Internal growth is that it allows the business to grow at a sensible rate (P) This is Because A Business Can Grow When They Have The finance available to do do without having to lend money from the bank or other sources of finance (S) Therefore Business Can Develop Their Products and Brand Gradually with less risk Involved (S)

Question 22

Give a Drawback Of Internal/Organic Growth (3 Marker)?

Answer 22

One Drawback Is That If The Business Growth Is too Slow Then Shareholders May not be Happy (P) This Is Because They may prefer more rapid Growth because they will receive a higher dividend Payment for their investments (S) Therefore if shareholders are not happy with the speed of growth they might invest elsewhere (S)

Question 23

Give a Benefit Of External/inorganic Growth (3 Marker)?

Answer 23

One Benefit Of External growth Such as merger or takeover is the reduction in competition (P) This will lead to an increase in market Share (S) Therefore allowing a business to have more security and possibly increase prices (S)

Question 24

Give a Drawback Of External/inorganic Growth (3 Marker)?

Answer 24

One drawback is that it could create possible redundancies (P) This is Because the business now has to double the amount of staff (S) As a Result the business might look to lower its costs by letting some staff go (S) This can then reduce the level of motivation of those remaining staff (S)

Question 25

Analyse The Impact of a Business Becoming a Public Limited Company (3 Marker)?

Answer 25

Worker Employed on permanent Contracts are more likely to feel Secure in their job (P) Therefore Motivation may be higher Which May Increase The Productivity of the business (S) This Will Reduce the cost per unit (S)

Question 26

Give a advantage of a business operating as a PLC (3 marker)

Answer 26

One Advantage of Being a PLC is that Shareholders have Limited liability (P) This is an advantage because investors are more likely to invest in shares due to less risk (S) This Leads to a PLC being able to raise large sums of money through issuing shares (S)

Question 27

Give a Disadvantage of a business operating as a PLC (3 marker)

Answer 27

One disadvantage of being a PLC is a Greater risk of Hostile takeover by a rival company (P) This is because the shares in a PLC are sold on the stock exchange to the general public (S) Therefore if an individual of a business is to gain more than 50%of the shares they would gain control of the business (S)

Question 28

Give a Benefit of a business obtaining Internal sources - Retained Profit (3 marker)

Answer 28

One benefit of using retained profit is that it is a cheap source of finance as it involves no borrowing from external sources (P) Therefore nothing has to be repaid on a monthly basis (S) This means the cash flow will be healthier as less monthly outflow (S)

Question 29

Give a Drawback of a business obtaining Internal sources - retained profit (3 marker)

Answer 29

A drawback of using retained profit is that it may upset shareholders (P) Who may feel that their dividend payment are too low as a result of the business not having as much retained profit (S) Therefore the business could end up losing their investors (S)

Question 30

Give a advantage of a business obtaining External Sources Of Finances - Share Capital (2 marker)

Answer 30

An Advantage of Selling Shares is that Large Sums of Money Can Be Raised (P) This is because PLC can sell their shares on the stock exchange (S)

Question 31

Give a Disadvantage of a business obtaining External Sources Of Finances - Share Capital (2 marker)

Answer 31

One Disadvantage of Selling Shares is Possible loss of control if the original owners sell more than 50% of the total shares (P) This is Because Business are at Threat of takeover (S)