Business Organisation

Question 1

What is internal growth ?

Answer 1

Can produce more of its current products

Can sell it’s current products into a new market

Can launch a new product

Question 2

Name one benefit of internal growth

Answer 2

Less likely to go wrong as it is using it’s existing products

Question 3

Name one problem with internal growth

Answer 3

It can take a long time to achieve growth, and some owners are therefore not prepared to wait that long and that’s why business then go for external growth

Question 4

What is external growth?

Answer 4

When takeovers and merger are used to then achieve the external growth

Question 5

What is a takeover ?

Answer 5

When an existing firm expands by buying another firm

Question 6

What is a merger ?

Answer 6

When 2 firms join together to form a new larger firm

Question 7

What is horizontal integration?

Answer 7

When one firm joins with another at the same stage of the same production process

Question 8

What is vertical integration?

Answer 8

Hymn one firm joins with another firm at different stages if the same production process

Question 9

What is conglomerate integration?

Answer 9

Wing one firm joins together with another firm in a different type of production process

Question 10

What is a franchise

Answer 10

When one business sells the right to another business to use it’s name and sell it’s products

Question 11

Name some benefits of growing through franchising

Answer 11

Business can grow faster

Business can achiever greater economies of scale

Increases brand awareness and market share of a firms products

Question 12

Name one cost of a firm growing through franchising

Answer 12

The original entrepreneurs no longer own the entire business

Question 13

What are the effects of expansion on shareholders

Answer 13

Shareholders- benefit from increased profits

Employees - benefit from a greater job security and may feel less involved as the business is bigger.

Government - collect more taxes

Suppliers- benefit from increased sales

Customers- benefit if the larger firm passes on any economies of scale in the firm of lower prices.

-however the business may have more competitors so are then able to charge higher prices and customers will not benefit from this.

Question 14

What is a Public limited company?

Answer 14

A company which can sell shares to anybody

Question 15

Name advantages of becoming a public limited company

Answer 15

Limited liability

Access to a greater number of potential investors

Raise much more capital, by selling shares through the stock exchange

Attracts more media coverage

Status is increased so then banks are more willing to lend them money.

Question 16

Name disadvantages of becoming a public limited company

Answer 16

• can’t control who buys it’s shares

- competitors may buy it’s shares and can take over the business.

Question 17

Name some reasons why business objectives change as it grows

Answer 17

To become more profitable

Dominate their market

Expanding overseas , and the main aim is to lead to more profit in the long term.

Spend more money on premises and new equipment

Question 18

Why is it good for a business to expand overseas??

Answer 18

Gives the business additional potential customers

Offers a growing market, and maximising revenue

May reduce certain risks

Gain access to raw materials and cheap labour

Increase their knowledge of local market conditions

Can avoid trade barriers by producing inside a country

Uk business might be at risk so locates to use ( example)

Question 19

Name the two ways which a business can grow

Answer 19

Internal growth (organic growth)

External growth (integration)