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Theme 2- Growing The Business Flashcards

1
Q

How does a business grow

A

When it sells more output over a period of time

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2
Q

Business growth is often an important objective as it may…

A

Help to increase market share
Lead to lower costs
Result in more profit

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3
Q

How does Internal (organic) growth occur

A

When a business expands by itself, by bringing out new products, entering new markets or using new technology

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4
Q

What are the methods of internal growth

A

New markets
New products
New technology

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5
Q

How does new markets help internal growth

A

Changes the marketing mix to find new markets or expanding overseas

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6
Q

How do new products help with internal growth

A

Businesses can Innovate or research and develop brand new products that are not currently available

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7
Q

How does new technology help with internal growth

A

Large organisations can benefit from investing in the latest technology or benefit from the ability to develop new technology themselves

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8
Q

What is external growth

A

A faster way of growth, involves the businesses to join forces with another

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9
Q

What are the 2 types of external growth

A

merger, takeover

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10
Q

Merger

A

Where 2 or more businesses voluntarily agree to join up and work as one business

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11
Q

Takeover

A

Where one business buys another. To take over a company it is necessary to gain control by buying enough shares.

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12
Q

Methods of external growth

A

Backward vertical (business joins with one at a previous stage)
Conglomerate (businesses with no common interest join)
Forward vertical (business joins with one at a later stage)
Horizontal (businesses at the same stage join)

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13
Q

How are PLC’s able to raise capital

A

Selling shares on a stock exchange. This form of ownership makes it easier for businesses to raise money for growth

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14
Q

What is a stock market floatation

A

When a business grows from LTD to PLC. They issue shares for sale on the stock exchange

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15
Q

Benefits of being a PLC

A

Ability to raise finance through capital
Limited liability
Considered more prestigious and reliable
May be able to negotiate better prices with suppliers
Greater public aware of business
Can become multinational

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16
Q

Disadvantages of being a PLC

A

More complex accounting and reporting procedures
Risk or potential takeovers
Increased public and media attention
Less privacy around financial performance
Greater influence on decision-making by external shareholders

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17
Q

Internal sources of finance

A

Sale of assets
Retained profit

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18
Q

External sources of finance

A

Loan capital
Share capital

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19
Q

Sale of assets

A

Quick way of raising capital, especially if the assets are no longer needed (fixed assets) but the business loses the benefit of owning the assets that it sells

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20
Q

Retained profit

A

Safest form of finance (no risk or debt). However, profit is not guaranteed and a business may require a more substantial investment than it can make as profit

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21
Q

Loan capital

A

Long term bank loan can be secured against the business’ assets, but interest will be charged and the business will have to make fixed repayments to repay the debt

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22
Q

Share capital

A

A PLC can raise considerable capital by selling shares. However selling shares puts PLC’s at risk of takeover and all shareholders are entitled to a share of the profits through dividends

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23
Q

Comparing sources of finance

A

Risk (selling shares mean owners may lose control, or cash flow problems may result from meeting loan repayment terms in loan capital)
Cost (the cost of borrowing varies across different sources)
Availability (some sources like loans or share capital may not even be available)

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24
Q

Why business objectives change

A

They adapt to their internal needs and the external pressures of the environment. Business will also find that objectives need to change as they seek to grow or survive

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25
List the factors affecting business objectives
Competitors (external) Technology (external) Market conditions (external) Legislation (external) Performance, leadership, culture (internal)
26
Factors affecting business objectives- competition
As new competitors enter the market or current competitors grow and become more competitive, a business may change its objectives to become more competitive
27
Factors affecting business objectives - technology
Objectives may be linked to the adaptation of new technology or the innovation and invention of new products made possible by new technology
28
Factors affecting business objectives- economic climate
The 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
29
Factors affecting business objectives- legislation
Legislation may force a business to change its products and services. This may restrict the businesses operations or create new opportunities that may be incorporated into its objectives
30
Targets for a growing business
- expand 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
31
Targets for a struggling business
-decrease product range -exit markets -achieve enough sales to break even -improve efficiency -maintain market share -reduce costs e.g. close stores or reduce workforce
32
Retrenchment
When a business downsizes the scale of it operations e.g. by decreasing the range of products it sells or closing some of its stores
33
Globalisation
Where businesses operate internationally and gain lots of influence or power. Globalisation changes the way businesses operate and creates considerable opportunities and threats
34
What are the 3 main ways globalisation affects businesses
Imports Exports Location
35
Imports
The flow of goods and services into a country from another country
36
Exports
The flow of goods and services out of a country to another country
37
How does globalisation affect imports
- Allows businesses to import products + raw materials at lower prices than they would be able to produce them for in UK - this can either be used for resale or producing their own goods - however, importing increases competition from foreign businesses that are able to sell directly to UK customers
38
How does globalisation affect exports
- Opens new international markets for businesses and gives them the potential to grow - however operating in international markets is different to a business operating in their country of origin. This means that businesses may face problems if they lack the necessary expertise/knowledge
39
How does globalisation affect location
- Brings opportunities for businesses to relocate operations to other countries, allowing them to benefit from lower labour costs, to be closer to raw materials or to be closer to the markets in which they sell their products
40
Multinationals
Large companies with facilities and markets around the world, creating jobs and growth when entering a country. However, smaller local businesses can lose out, especially in less economically developed countries
41
Benefits of globalisation for a business
- new market opportunities - access to technology + resources
42
Drawbacks of globalisation for businesses
- Threat from foreign competition - Challenge of adapting products and services to meet the needs of foreign consumers
43
International trade
the exchange of goods and services between countries
44
Free trade
When there are no barriers to trade between countries
45
Protectionism
When some governments take actions that restrict the flow of imports into their country
46
Trade barriers
Tariffs Quotas Subsidies Trade blocs Non-tariff barriers
47
Tariffs
Taxes on imports
48
Quotas
Physical limits on imports
49
Subsidies
Money given to help domestic producers
50
Trade blocs
Promoting trade between a small group of countries
51
Non-tarrif barriers
Imposing quality or safety standards
52
Reasons for trade barriers
Protecting jobs in domestic industries Protecting emerging (infant) industries Preventing the dumping of cheap goods on the domestic market and the entry of undesirable goods Raising revenue from Tarrifs
53
Examples of trade blocs
ASEAN, NAFTA
54
E commerce
the buying and selling of goods over the internet, business can trade 24 hrs a day + promote thru social media
55
How can a business change their product to compete internationally
- change tech components - change taste to appeal culture
56
Glocalisation
The modification of global products and ideas to suit local conditions.
57
How could a business change their price to compete internationally
- comply with diff tax laws - account for currency conversions
58
How can businesses change their place to compete internationally
- check which shops ppl visit - check what time ppl there shop
59
How can businesses change promotion to compete internationally
- change colours, gestures, phrases etc
60
Trade off
an alternative that we sacrifice when we make a decision
61
Example of trade off in business
Paying high wages to motivate staff, but you lose profit
62
Pressure group
Organisations that try to make businesses change their behaviour or operations
63
Impact of pressure groups on product
May have to use of sustainable resources and ensure that all products are safe
64
Impact of pressure groups on price
Maybe influence to increase the price paid to small suppliers or pay suppliers, fair prices, where there is limited competition for supplies
65
Impact of pressure groups on place
Source local products
66
Impact of pressure groups on promotion
Obey advertising legislation
67
Examples of ethical behaviour by businesses
- Treating workers and suppliers fairly - Being honest with customers
68
Ways to reduce environmental impact
use renewable energy Using biodegradable packaging
69
As businesses expand...
They will have a bigger impact on environment, so need to reduce it to have long term success
70
Short term impacts of businesses on the environment
traffic congestion through transports and deliveries Air, noise and water pollution thru manufacturing and industry
71
Long term effects of businesses on environment
Climate change Depletion of land, food and resources
72
Changes in business objectives- performance, leadership, culture
A change in working culture or the businesses leaders is also likely to influence its objectives so that they maths the ambitions or personality of its managing director or CEO
73
Short term sources of finance
Overdrafts Trade credit
74
Long term sources of finance
Personal savings Venture capital Share capital Bank loan Retaineded profit Crowd profit

business (6 decks)

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