Business Growth

Question 1

What is business growth?

Answer 1

The point at which a business needs to expand to gain more profit

Question 2

What are the objectives of growth?

Answer 2

1. To gain EOS
2. Increased market power
3. Increased market share and brand recognition
4. Increased profitability

Question 3

What are the problems arising from growth?

Answer 3

1. Diseconomies
2. Internal communication
3. Overtrading

Question 4

What are the tactical reasons for mergers and takeovers?

Answer 4

1. Attempt to ensure increased market share
2. Access to technology, staff or intellectual property

Question 5

What are the strategic reasons for mergers and takeovers?

Answer 5

1. Access to new markets
2. Improved distribution networks 3. Improved brand awareness

Question 6

What is a merger?

Answer 6

A merger is a legal deal to bring two businesses together under one board of directors

Question 7

What is a takeover?

Answer 7

When a larger business buys another smaller business

Question 8

What is the primary sector?

Answer 8

Businesses that are involved in digging fishing, Mining to remove products from the planet at source.

Question 9

What is the secondary sector?

Answer 9

Businesses that turn the raw materials into products

Question 10

What is the tertiary sector?

Answer 10

Businesses that sell goods to the customers

Question 11

What is horizontal integration?

Answer 11

Businesses operating in the same sector merge or takeover another business

Question 12

What is vertical integration?

Answer 12

When a business merges or takeover with a business from another sector or part of the supply chain

Question 13

What are the financial risks of mergers and takeovers?

Answer 13

• original purchase cost
• cost of change into a new business
• redundancies of duplicate staff

Question 14

What are the financial rewards of mergers and takeovers?

Answer 14

• increased revenue
• economies of scale

Question 15

What are the short term problems with rapid growth?

Answer 15

• outgrow their premises
• morale dropping caused by extra work
• shortage of cash

Question 16

What are the problems with mergers and acquisitions?

Answer 16

• Clash of cultures
• Possible communications problems
• Most fail
• Diseconomies of Scale

Question 17

What is Organic growth?

Answer 17

The process of business growth which comes from within the business as opposed to mergers and takeovers

Question 18

What is inorganic growth?

Answer 18

Growth in a business through a merger, takeover or a joint venture

Question 19

What are the methods of organic growth?

Answer 19

1. New product launches
2. Opening new stores or branches
3. Expanding into foreign markets
4. Expansion of the workforces

Question 20

What are the advantages of organic growth?

Answer 20

• This avoids all the risks and pitfalls of merging with another business
• Cheaper than merging
• Retains the company culture
• Can be planned for unlike a takeover
• Higher production means EOS and lower average costs

Question 21

What are the disadvantages of organic growth?

Answer 21

• long time to see ROI
• hard to enter markets in other countries

Question 22

What is a small business?

Answer 22

Business with fewer than 250 employees

Question 23

What are the reasons for a business staying small?

Answer 23

• flexibility in responding customer needs
• better customer service
• E-commerce