3.1 Business growth

Question 1

3.1.1 A)
Why do firms stay small

Answer 1

By choice or by force

Question 2

3.1.1 A)
Why do firms choose to stay small

Answer 2

They have local monopoly ( may not be able to replicate on large scale)
- To avoid diseconomies of scale
-to keep objective clear & consistent
-Owner wants good work life balance
-TO stay out of sight of larger firms

Question 3

3.1.1 A)
Why are firms forced to stay small

Answer 3

-Market may have low barrier to entry
-Firm may lack finance to expand (bank sees them as a risk)
-Reached limited for demand
-Owner may lack skill to growth firm further

Question 4

3.1.1 A)
Why do firms grow

Answer 4

-To meet objectives (^ market share, ^ stakeholder value)
-Response to external forces, tech advancements, political/ legal change. change in consumer demand
-Response to internal foprces. Employee pressure, owner power
-gain competive advantage

Question 5

3.1.1 B)
What is divorce of ownership

Answer 5

Occurs bcos those who own firm often not the same controlling busniess day-to-day

Busniess owners wish to maximize profits

Managers wants to maximize personal benifit leads to conflit of intrest between the too

Question 6

3.1.1 B)
Principle agent problem

Answer 6

• firm owners not part of day to day running of busniess
• managers make day-to-day decisons
  -stakeholder have say in busniess

Busniess owners wish to maximize profits

Managers wants to maximize personal benifit leads to conflit of intrest between the too

principle agent problem where one group make decisons (agent) of behald of another group (principcal)

leads to profit stisice instead of profit maximization. this could be fixed by giving manager shares of linking bonous to profit

Question 7

3.1.1 B)
What is private sector

Answer 7

refers to economies owned and run by indivdiual or group of individuals

Question 8

3.1.1 B)
What is public sector

Answer 8

owned / controlled by local or centeral govt provided servies profit is not the aim

Question 9

3.1.1 C)
profit vs non-profit org

Answer 9

-private sector run to make profit and max financical benifit for their stakeholdrr
-some private non profit. profit made support their aim of mazimaize social welfare

Question 10

3.1.2)
How do busniesses grow

Answer 10

Organically or through intergration

Question 11

3.1.2 A)
How does organic growth occur

Answer 11

through investing in more capital by borrowing money or raising funds, increasing output

Question 12

3.1.2 B)
Adv of organic growth

Answer 12

its expensive and time consuming to intergrate
firm keeps control of busniess

Question 13

3.1.2 B)
DAdv of organic growth

Answer 13

Another firms may have a market or asset that cant be gained through organic growth

organic growth can be slow

difficult for new firms to get new ideas

Question 14

3.1.2 A)
What is intergration

Answer 14

Growth through amalgamation, mergers and takovers.
amalgamation, mergers when compaines combine / come under common ownership.

Question 15

3.1.2 A)
What is vertical intergration

Answer 15

Is the intergration of a firm of the same industry but different parts of the production process

Question 16

3.1.2 A)
Forwards vs backwards vertical intergration

Answer 16

going towards the suppliers is backwards
going towards the consumer is forward

Question 17

3.1.2 B)
Adv of vertical intergration

Answer 17

increased potential for profit
less risk about not enough demand or ss for ur product
backwards - they have more control of quality and delivery
forward - secures retail outlets and reduces choice for competetion

Question 18

3.1.2 B)
DAdv of vertical intergration

Answer 18

Lack experience in that field

Question 19

3.1.2 A)
What is horizontal intergration

Answer 19

Intergration from firms in the same industry and the same point in the production proceess

Question 20

3.1.2 B)
Adv of horizontal intergration

Answer 20

v competetion. ^ market share, ^ influence
specialise reducing dupliates in busniess
growth

Question 21

3.1.2 B)
DAdv of horiztonal intergration

Answer 21

^ risk if that market fails

Question 22

3.1.2 A)
What is conglomerate intergration

Answer 22

intergration for firms in diff industries with no clear connections

Question 23

3.1.2 B)
Adv of conglomerate intergration

Answer 23

useful is no room to grow in current market
reduce risk of industry failure
easier to expand as rescourses are there

Question 24

3.1.2 B)
DAdv of conglomerate intergration

Answer 24

No expertices can damage a busniess

Question 25

3.1.2 C)
Constrains on busniess growth

Answer 25

Size of market - difficult to grow more
access to finance - unwilling to be lent £ cant afford growth
owner objectives - some dont want to grow due to being happy in current pos , and not wanting more risk
regulations - prevents growth through laws (monopoly)

Question 26

3.1.3)
What is a demerger

Answer 26

Is a busniess strat in which a single busniess is broken down into 2+ components

Question 27

3.1.3 A)
Reasons for demergers

Answer 27

Lack of synergies
Value of company/share price
Focussed companie

Question 28

3.1.3 A)
How does Lack of synergies lead to demergers

Answer 28

Diff parts of company have no real impact on eachother and fail to make eachother more efficent. Lack of synergies means managers spilit between such diff areas could lead to diseconomies of scales.

Question 29

3.1.3 A)
How does Value of company/share price lead to demerger

Answer 29

part of company worth more than combineded. some areas have more potential to grow

Question 30

3.1.3 A)
How does focused companies lead to demerger

Answer 30

Managers/company focused on individual markets they become more eff. focusing on one area managers can improve skill and knowledge

Question 31

3.1.3 B)
How does demegers effect workers

Answer 31

workers could gain or lose. could lead to better jobs are new managers needed. however could lead to layoffs as areas try become more eff.

Question 32

3.1.3 B)
How does demegers effect busniesses

Answer 32

more efficent however loss of economies of scale

Question 33

3.1.3 B)
How does demegers effect consumers

Answer 33

cheaper/better products or more expensive reduced qual or range of goods