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Business > Section 6 - The Business Organisation > Flashcards

Section 6 - The Business Organisation Flashcards

1
Q

Why do businesses want to grow?

A
  • Make more money, increase profit
  • More brand awareness, better reputation
  • Increase innovation
  • Expand target market
  • Increase product range, economies of scale
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2
Q

What are the two types of business growth?

A
  • Organic

- Inorganic

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3
Q

What is organic growth?

A

Expansion from within the business i.e. opening more stores

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4
Q

What is inorganic growth?

A

Expansion involving another business i.e. merger, takeover, acquisition

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5
Q

What are the advantages of organic growth?

A
  • Cheaper
  • More control over business
  • Grow at suitable rate for business, manageable growth
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6
Q

What are the disadvantages of organic growth?

A
  • Slow

- More work

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7
Q

What are the advantages of inorganic growth?

A
  • Quicker
  • Reputation of established company, customers
  • Easier
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8
Q

What are the disadvantages of inorganic growth?

A
  • Expensive
  • Risky
  • Less control
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9
Q

What are the benefits of growing a business?

A
  • More money/profit
  • Brand awareness
  • Increase target market
  • Economies of scale
  • Increase product range
  • Increase skills as more staff
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10
Q

What are the drawbacks of growing a business?

A
  • More responsibility
  • More costs
  • More debts
  • Bigger loss
  • Higher expectations
  • Increased competition
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11
Q

What is horizontal growth?

A

Buying a business on the same level of production as you, e.g. Apple buying Samsung

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12
Q

What is vertical backwards growth?

A

Buying one level behind you in the production scale, such as buying the factory or the land

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13
Q

What is vertical forwards growth?

A

Buying one level ahead of you in the production scale, such as buying stores

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14
Q

What are the business objectives of a growing business?

A
  • Increase customers/profits
  • Become more environmentally friendly
  • Become international
  • Increase innovation
  • More skilled employees
  • Expand, more stores
  • Increase market share
  • Increase product range
  • Increase target market
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15
Q

What are the features of a limited business?

A
  • Limited liability + incorporated under companies act
  • Shareholders can not be responsible for debt (limited liability); can only lose what they put in
  • Shareholders seen as separate from company
  • Tax advantages (pay less tax) from higher set up costs
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16
Q

What are the private benefits to the business of growing?

A
  • More profit
  • More brand awareness
  • Economies of scale
  • Skilled employees
  • More publicity
  • More brand reputation
  • Innovation
17
Q

What are the private costs to the business of growing?

A
  • More scrutiny from public/media
  • More to lose
  • Competition with already established businesses
  • Production costs, equipment
  • Staff
  • Expectation of quality
18
Q

What are the social benefits to the business of growing?

A
  • Creation of jobs
  • More money to society
  • Growth of area
  • Generates competition (lower price)
19
Q

What are the social costs to the business of growing?

A
  • Impact on local businesses (causing closures)
  • Less land available
  • Environmental, pollution
  • Noise + impact of building
  • Traffic
20
Q

What is the difference between a PLC and an Ltd?

A
  • PLC; sell shares on the stock market

- Ltd; must be incited to invest in shares

21
Q

What are the advantages of being a PLC?

A
  • Easy to raise money/finance; can grow/diversify
  • More brand awareness; easier to secure a loan
  • Limited liability
22
Q

What are the disadvantages of being a PLC?

A
  • Risk of takeover
  • Share profits
  • Loss of control; need to consult shareholders in decision, arguments
  • Shareholders want money whereas owner want to reinvest for growth
23
Q

What are the advantages of being an Ltd?

A
  • Limited liability

- No risk of takeover

24
Q

What are the disadvantages of being an Ltd?

A
  • Harder to attract investors/secure finance

- Share profits

25
Q

What is diversification?

A

Selling into different markets in order to reduce the risk and reduce the threat of their profits

26
Q

Why do businesses become multinational enterprises?

A
  • Easier access to raw materials/cheap labour
  • Reduce risk of foreign exchange fluctuations
  • Avoid trade barriers; producing inside a country
  • Win subsidies from government as threaten to relocate (government want employment)
  • Can reduce transport costs
  • Better knowledge of local market conditions
27
Q

What are the benefits of a multinational enterprise to the host country?

A
  • Source of foreign investment; create employment
  • Gives host access to foreign technology
  • Profits of MNE can be a source of taxation revenue for host country’s government
  • Likely they’ll export, improving balance of payments (difference of money coming in through exports + money going out through imports)
28
Q

What are the problems of a multinational enterprise to the host country?

A
  • Jobs created often unskilled = long hours + low pay, argue unfair treatment
  • Can cost money as need roads etc
  • Local industries could close as MNE has economies of scale
  • Environmental damage + pollution
  • Benefit the shareholders more than the locals

Business (13 decks)

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