Expanding A Business

Question 1

Internal growth

Answer 1

(Organic growth) when a business gets bigger from selling more of its products

Question 2

External growth

Answer 2

(Integration) when a business gets bigger from joining or buying other businesses

Question 3

Market capitalisation

Answer 3

Measures the value of all shares. Market capitalisation = market price of a share * all shares

Question 4

Value of sales/revenue/turnover

Answer 4

Value of sales is also called revenue or turnover. The bigger the turnover, the bigger the business. Increasing sales may also increase a firm’s market share.

Question 5

Value of the business

Answer 5

Size of a business can be calculated by value of its assets - liabilities. Higher business value, more the owners are worth. Another way of measuring value of business is to calculate value of shares.

Question 6

Number of employees

Answer 6

For businesses that are impossible to calculate revenue, you could estimate by calculating number of employees.

Question 7

Franchise

Answer 7

Occurs when a franchisor sells the rights to its products to a franchisee; this is usually in return for a fee and percentage of a turnover

Question 8

Franchisee

Answer 8

A franchisee buys a franchise usually in return for a fee and a percentage of a turnover

Question 9

Franchisor

Answer 9

A franchisor sells a franchise usually in return of a fee and percentage of a turnover

Question 10

Avantages of selling a franchise

Answer 10

Can grow quickly. Franchisee provides some of the finance. Franchisees motivated as they are running their own business.

Question 11

Disadvantages of selling a franchise

Answer 11

Lose some control. Danger of problems with one franchisee affecting the entire brand. Have to share profits.

Question 12

Advantages of buying a franchise

Answer 12

Established brand. Access to training & supplies. Share marketing costs. Learn from other franchises.

Question 13

Disadvantages of buying a franchise

Answer 13

Have to share profits. May have to work within franchisor’s guidelines. Have to contribute to group marketing. Sales may suffer if another franchisee gets a bad reputation.

Question 14

E-commerce

Answer 14

The act of buying or selling a product using an electronic system such as the internet

Question 15

Outsourcing

Answer 15

This occurs when a business uses other businesses to produce for it

Question 16

Merger

Answer 16

Occurs when two or more businesses join together to create a new business

Question 17

Takeover

Answer 17

Occurs when one business buys control over another one

Question 18

Economies of scale

Answer 18

Occurs when a business’s unit cost of production falls as its output rises and the business expands

Question 19

Diseconomies of scale

Answer 19

Occur when the cost per unit increases as the business expands

Question 20

What is the formula for average unit costs?

Answer 20

Total costs/total output

Question 21

Data Analysis

Answer 21

The gathering and examining of data to provide useful information that can be used for decision making.