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Business Theme 2 > Growing the business > Flashcards

Growing the business Flashcards

1
Q

Why is business growth an important objective?

A

helps to increase market share
lead to lower costs
results in more profit

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2
Q

How does internal growth occur?

A

A business expands by itself by bringing out new products or entering new markets

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3
Q

Methods of internal growth

A

New markets - changing the marketing mix to find new markets or expanding overseas
New products - innovating or researching and developing brand new products that are not currently available
new technology - large organisation can benefit from investing in the latest technology or in the ability to develop new technology themselves

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4
Q

External (inorganic growth)

A

faster way for a business to grow by joining forces with another

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5
Q

Two approaches to external growth

A

Merger - two or more businesses voluntarily agree to join up and work as one business
Takeover - one business buys another
to take over a company it is necessary to gain control by buying enough shares

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6
Q

Backward vertical

A

business joins with one at a previous stage (e.g supplier)

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7
Q

Horizontal

A

businesses at the same stage

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8
Q

Conglomerate

A

businesses with no common business interest join

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9
Q

Forward vertical

A

business join with one at a later stage (e.g a customer)

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10
Q

Public limited company

A

An incorporated business that can sell shares to the public on a stock exchange

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11
Q

Stock exchange

A
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12
Q

How can a private limited company (Ltd) change into a public limited company?

A

Through a stock market flotation

this is where business issues shares for sale on the stock exchange

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13
Q

Benefits of being a PLC

A

ability to raise finance through short capital
limited liability
considered more prestigious and reliable
maybe able to negotiate better prices with suppliers
great public awareness of business

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14
Q

Drawbacks of being a PLC

A

more complex accounting and reporting procedures
risk of potential takeovers
increased public and media attention
less privacy around financial performance
greater influence on decision making by external shareholders

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15
Q

Internal sources of finance

A

Sales of assets -
a large business may have assets that it no longer needs such as fixed assets or excess stock
selling assets is a quick way of raising capital
business loses benefit of owning the asset it sells

Retained profit -
safest form of finance - involves no risk or debt
profit is not guaranteed and a business may require a more substantial investment than it can make as profit

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16
Q

External sources of finance

A

Long capital -
long-term bank loan can break secured against the businesses asserts
interest will be charged and the business will have two make fixed repayments to repay the debt

Share capital -
A PLC can raise considerable capital by selling shares
selling shares puts PLC’s at risk of being taken over
stakeholders are also entitled to a share if the profits through dividends

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17
Q

Dividend

A
18
Q

Why may business objectives change?

A

As business evolve and grow their objectives change to adapt to their internal needs and the external pressures of the environment

19
Q

External factors affecting business objectives

A

Competition - as new competitors enter the market or current competitors grow and become more competitive a business may change its objective and become more competitive

Technology - adoption of new technology or the innovation and invention of new products made possible by technology

Market conditions - economic climate may change the level of demand and spending in the market
a fall or rise in demand will influence a businesses ambitions and objectives

Legislation - may force a business to change its products and services
may restrict the businesses operation or create new opportunities

20
Q

Internal factor affecting business objectives

A

The annual objects reflect the previous performance of a business
a change in work culture or the business’s leaders is also likely to influence its objectives so that they match the ambitions of the managing director or CEO

21
Q

Targets for a growing business

A 
expands the product range 
enter new markets 
increase sales 
increase profits 
gain a larger market share 
take over other businesses 
open new stores 
increase the workforce
22
Q

Targets for a struggling business that focus on survival

A

decrease the product range
exit markets
achieve enough sales to break even improve efficiency
maintain market share
reduce costs - close stores, reduce workforce

23
Q

Retrenchment

A

business downsizes the scale of its operations e.g by decreasing the range of products it sells or closing some of its stores

24
Q

Globalisation

A

business operate internationally and gain a lot of influence or power

25
Q

Imports

A

the flow of goods and services into one country from another country

26
Q

Exports

A

the flow of goods and services out of one country to another country

27
Q

Impacts of globalisation

A

Imports -
allows businesses to import products and raw materials at lower prices than they would be able to produce them for in the UK
importing products increases competition from foreign businesses that are able to sell directly to UK costumers

Exports -
exporting opens up new international markets for business and gives them potential to grow
operation International markets can be different to operating in the UK
business may face problems if they lack the necessary knowledge

Location -
brings the opportunity for business to relocate to other countries
may be to benefit from lower labour costs, to be closer to raw material or to be closer to the markets to which they sell their products

28
Q

Multinationals

A

a large company with facilities and markets around the world
are powerful businesses that can create lots of jobs and growth the. they enter a country
however smaller local businesses can lose out - especially in less economically developed countries

29
Q

Benefits of globalisation for businesses

A

new market opportunities

access to technology and resources

30
Q

Drawbacks of globalisation for businesses

A

Threat from foreign competition

challenge of adapting products ad services to meet the needs of foreign consumers

31
Q

International trade

A

the exchange of goods and derives between countries

32
Q

Free trade

A

there are non barriers to trade between countries

33
Q

Protectionism

A

when some governments take actions that restrict thew flow of imports into their countries

34
Q

Types of trade barriers

A

Quotas - physical limited on imports
Subsidies - Money given to help domestic producers
Trade blocs - promote trade between small countries
Non-tariff barriers - imposes quality or safety standards
Tariffs - taxes on imports

35
Q

Reasons fo trade barriers

A

protecting jobs in domestic industries
protecting emerging industries
preventing the dumping of cheap goods on the domestic market and the entry of undesirable goods
raising revenue from tariffs

36
Q

Trade blocs

A

created when the governments of different countries agree tot act together to promote trade among themselves
this agreement gives members of nations of the trade bloc preferential treatment in other countries within the trade bloc to encourage trade between the countries

trade blocs -
The Association go the Southeast Asian Nations (ASEAN)
The North American Free Trade Association (NAFTA)

37
Q

E-commerce

A

enables businesses to access international markets without the need to distribute or sell their products through foreign retailers
business can trade 24 hours a day
promote themselves through social media sites
trade barriers may still apply when selling over the internet

38
Q

Glocalisation

A

in order to sell to international markets businesses often have to change their products
this is so they can adapt to other countries cultural differences, taste and legal requirements

39
Q

How can a business change its PRODUCT to compete internationally?

A

change technological components (e.g sockets)
change taste to meet cultural preferences
change components to meet safety regulations

40
Q

How can a business change its PRICE to compete internationally?

A

change price to consider tariffs
comply with different tax laws
account for currency conversion
account for income in foreign countries

41
Q

How can a business change its PLACE to compete internationally?

A

change location of products in line with local preferences (e.g what shops people visit and what time they shop)

42
Q

How can a business change its PROMOTION to compete internationally?

A

revise advertising campaigns to take into account the fact that meanings of colours, gestures and phrases are different in different countries

Business Theme 2 (1 decks)

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