Business activity Flashcards
What is an Aim in business?
The overall target or goal of the business
What is a business objective
The steps a business needs to take to meet its overall aims
Financial Aims examples
- Business survival- common for small business
- Profit- aim to make profit within first 2 years
- Sales- a business will set a target for how much it wants to sell each month and year
- Market Share- percentage of the market the business occupies
- Financial security- business being able to pay off all its costs + have enough cash left to survive
What is business growth
when the business sells more output over a period of time
What is internal/organic growth?
Occurs when a business decides to expand its own activities by launching new products and/or entering new markets
Why do businesses organically/internally grow?
To improve their chances of increasing their customers, revenues and profits
Advantage + disadvantage of organic/ internal growth
Advantage:
- low risk
Disadvantage:
- slower growth
What is external growth?
External growth is growth outside the business, this usually involves a merger or takeover.
What is a merger?
A merger occurs when two businesses join to form a new (but larger) business.
What is a takeover?
A takeover occurs when an existing business expands by buying more than half the shares of another business.
What are the four merger and takeover methods?
- Horizontal growth
- Backwards vertical growth
- Forwards vertical growth
- Diversification
What is backwards vertical growth?
Occurs when a business takes control of a business earlier in the supply chain
eg. When an ice cream business takes over a dairy farm
What is forwards vertical growth?
Occurs when a business takes control of another that operates at a later stage in the supply stage
eg. a car company buying or merging with a car showroom
What is diversification?
Occurs when a business in unrelated markets join through a takeover or merge. This enables businesses to spread their risk over a wider range of products and services.
eg. when a clothes business expands into selling home goods + accessories
What is horizontal growth?
Occurs when two competitors join through merger or takeover. The new business then becomes more competitive and increase its market share. This gives it more control when negotiating and setting prices.
What is the purpose of business activity and enterprise
- spotting an opportunity
- developing an idea for a business
- satisfying the needs of customers
What are the characteristics of an entrepreneur?
- creative
- risk taking
- determination
- confidence