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Business Studies > Business Growth > Flashcards

Business Growth Flashcards

1
Q

What are the signs of success?

A

-Increasing profit
-Attracting new customers
-Expansion
-Favourable customer reviews
-Word of mouth recognition
-Listings on social media or increased publicity

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2
Q

What does favourable customer reviews mean?

A

The company receiving good reviews on their website from satisfied customers.

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3
Q

What does increased publicity in relation to success mean?

A

A business will be frequently listed in social media if they are successful which increases publicity.

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4
Q

What are the signs of failure?

A

-Loss of profit
-Poor cash flow
-Loss of customers
-Unfavourable customer reviews
-High employee turnover

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5
Q

What is poor cash flow in relation to failure?

A

A business not having enough cash to pay trade payables or employees. Suppliers will stop supplying business and employees will quit.

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6
Q

What is high employee turnover in relation to failure?

A

A business being unable to attract new employees or keep existing staff due to being unsuccessful.

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7
Q

What are the two types of business growth?

A
  1. Internal or organic growth
  2. External growth
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8
Q

What are the different types of internal/organic growth?

A

-Reinvestment
-Expansion of product range
-Increased sales activity

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9
Q

What are the advantages and disadvantages of reinvesting profits?

A

A: Business can grow and increase sales. No interest paid. Flexible as management can control how much is reinvested.

D: Less money to pay dividends and shareholders. Not possible if business makes a loss.

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10
Q

What are the advantages and disadvantages of a business expanding its product range?

A

A: More customers and increased sales and profits. Increased customer satisfaction (increases customer loyalty). If one product fails the business has more to fall back on.

D: Market research can be expensive. New products will have to be advertised. Consumer awareness of new products are low.

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11
Q

What does increasing sales activity mean?

A

Opening new retails or increasing size of existing retails, or operating online. Or trading in new international markets. This will achieve additional sales.

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12
Q

What are the advantages and disadvantages of increasing sales activity?

A

A: Increases sales and profits. Increases market share. Business’s reputation improves along with corporate image.

D: Market research needs to be carried out which is expensive. Expensive way of achieving growth.

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13
Q

What are the different types of external growth?

A
  1. Takeover
  2. Mergers
  3. Franchising
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14
Q

What is a takeover?

A

Where a business buys majority of shares to control another business.

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15
Q

What are the advantages and disadvantages of takeovers?

A

A: Very fast method of growth. Business can benefit from economies of scale. Gets rid of competitor so market share rises.

D: Can be hostile. Lead to redundancies which can damage corporate image. Very expensive.

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16
Q

What are mergers?

A

An agreement of two or more businesses joining together to form one.

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17
Q

What are the advantages and disadvantages of mergers?

A

A: Economies of scale is achievable. Fewer staff required to manage business. Market share increases.

D: Redundancies likely since duplication of resources is probable. Limited choice of products for consumers. Lack of competition in market place.

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18
Q

What is franchising?

A

Where a business idea is hired out to another business.

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19
Q

What are the advantages and disadvantages of franchising?

A

A: More chance of success as brand name is already known. Franchisor increases market share. Locally owned business benefits from national marketing campaigns.

D: Lack of creativity. No guarantee max sales will be achieved. Unlikely franchise will have input into national marketing campaigns.

20
Q

What are the factors that can limit growth of firms?

A
  1. Lack of finance.
  2. Increased competition
  3. Lack of demand
  4. Difficult economic climate
21
Q

How does lack of finance limit growth of firms?

A

If business does not raise required capital it would be impossible to expand.

22
Q

How does increased competition limit the growth of firms?

A

Larger businesses can sell more products at more competitive prices. Growth is restricted as smaller business doesn’t have enough customers to expand.

23
Q

How does lack of demand limit the growth of firms?

A

If customer demand doesn’t exist for product or service range then the business may not be able to secure growth. (product may be too expensive or unfashionable)

24
Q

How does a difficult economic climate limit the growth of firms?

A

If level of consumers income declines then they will spend less. Leads to falling sales and profits.

25
Q

What does economies of scale mean?

A

Gained when a business increases its production and this causes a decrease in average production costs.

26
Q

What are the 4 main types of economies of scale?

A
  1. Technical economies of scale
  2. Financial economies of scale
  3. Marketing economies of scale
  4. Purchasing economies of scale
27
Q

What is technical economies of scale?

A

Introducing new technology or changing production methods. This can lower average costs and speed up production.

28
Q

What is financial economies of scale?

A

Where larger business can borrow larger sums of money at lower rates of interest.

29
Q

What are the 2 types of marketing economies of scale?

A
  1. Distribution
  2. Advertising
30
Q

What is marketing economies of scale in relation to distribution?

A

Distributing more products at once then individually distributing them. This decreases costs of petrol and driver.

31
Q

What is marketing economies of scale in advertising?

A

For large businesses advertising expenditure is less per unit of production than small businesses.

32
Q

What is purchasing economies of scale?

A

Buying raw materials in bulk. Buyers negotiate larger discounts as they have more power.

33
Q

What are the advantages of growth?

A
  1. Increased profit
  2. Economies of scale
  3. Greater market influence
34
Q

What are the advantages of growth?

A
  1. Increased profit
  2. Economies of scale
  3. Greater market influence
35
Q

How is economies of scale an advantage of growth?

A

Decreases average production costs

36
Q

How is being a greater market influence an advantage of growth?

A

A larger business can negotiate greater discounts with suppliers and sell products at a lower price. (Makes it difficult for rivals to compete)

37
Q

What are the disadvantages of growth?

A
  1. Poor communication
  2. Lack of motivation
  3. Difficulties of co-ordination
38
Q

Why is poor communication a disadvantage of growth?

A

It is more difficult to maintain high standards of communication between staff and various departments. (leads to lower levels of profit and may increase costs)

39
Q

How is lack of motivation and disadvantage of growth?

A

Employees feel devalued and demotivated when a business becomes larger.

40
Q

How is difficulties of co-ordination a disadvantage of growth?

A

When a business becomes larger and has a wide geographical spread it can be difficult to co-ordinate business activities and processes effectively.

41
Q

What are the ethical implications of growth?

A

To grow a business in a morally correct way. Everything has to be done in a fair, legal, responsible and honest way.

42
Q

How can businesses ensure their growth strategies are ethical?

A

-Make sure growth doesn’t have negative impact on environment. (Use sustainable materials, renewable energy, reduce waste)
-Paying suppliers fair price for products even with economies of scale.
-Ensuring overseas employees pay their employees a fair wage and provide them with safe working environment.

43
Q

What is the The Competition and Markets Authority? (CMA)

A

An independent body whose purpose is to investigate mergers, acquisitions etc to ensure they are fair to customers.

44
Q

What is the aim of the Competition and Markets authority?

A

To ensure competition between businesses remains that market works well for customers.

45
Q

How do the competition and markets authority (CMA) ensure market works well for consumers?

A

-Undertakes enquiries into monopolies and mergers.
-Enforces consumer protection laws
-Considers appeals on decisions made on mergers and on the abuse of market power.

Business Studies (3 decks)

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