Theme 2: Topic 2.1 Growing the business Flashcards

1
Q

Name the two types of business growth

A

Organic (internal) and inorganic (external)

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2
Q

What is internal growth?

A

Growth within a business by it expanding by itself

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3
Q

How does a business grow internally?

A

By entering new markets
By producing new products
By benefiting off new technology

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4
Q

What are the advantages of business growth?

A

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

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5
Q

How does a business grow externally?

A

Merger

Takeover

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6
Q

What is a business merger?

A

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

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7
Q

What is a business 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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8
Q

State one reason why a business might want to grow?

A

Higher profit

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9
Q

What is a conglomerate?

A

Businesses joining with no common business interest

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10
Q

What is backward vertical?

A

Businesses joining with suppliers

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11
Q

What is forward vertical?

A

Businesses joining with customers

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12
Q

Which of the following is a definition of the term ‘merger’?
A - Two or more businesses voluntarily joining together
B - One business buying enough shares in another business to control it
C - Two businesses work together to design a new product
D - One business taking over another company

A

A - Two or more businesses voluntarily joining together

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13
Q

How are PLC able to raise capital?

A

By selling shares on a stock exchange

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14
Q

What are the benefits of being a PLC?

A

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

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15
Q

What are the 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 shakeholders

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16
Q

Explain one disadvantage of becoming a public limited company

A

One disadvantage of becoming a PLC is that the directors cannot control who buys the company’s shares once they have been issued on a stock market. This means that the business is open to takeover, which could limit the control the directors have over the business

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17
Q

Give examples of internal sources of finance

A

Sale of assets

Retained profit

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18
Q

Give examples of external sources of finance

A

Share capital

Loan capital

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19
Q

How can you compare sources of finance?

A

Risk
Cost
AVailability

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20
Q

Explain one disadvantage to the business of borrowing money from a bank to finance growth

A

If a business borrows money from a bank, it has to repay the loan on a fixed-term basis with interest. A business could then struggle to make these regular payments and this could lead to cash-flow problems

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21
Q

State one internal source of finance that a business might use to expand

A

Sale of assets or retained profit

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22
Q

What factors affect business objectives?

A
Competitors
New technology
Legislation
The economic climate
Changing culture
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23
Q

How does technology affect business objectives?

A

Becausse new tech can make new products possible

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24
Q

How do new competitors affect business objectives?

A

Because companies may change objectives to compete with new competition

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25
Q

How does legislation affect business objectives?

A

Because new laws may restrict or open up new opportunities for businesses

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26
Q

How does the economic climate affect business objectives?

A

A fall or rise in demand will influence a businesses decisions

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27
Q

Give examples of internal factors affecting business objectives

A

Performance leadership culture

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28
Q

Give examples of external factors affecting business objectives

A

Competition
Legislation
Market conditions
New technology

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29
Q
Which one of the following is an example of an internal factor that could influence the objectives of a business?
Select one answer
A - Market conditions
B - Legislation
C - Culture
D - Competition
A

C - Culture

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30
Q

What are the targets for a growing business?

A
Expand the product range
Enter new markets
Increase sales and profits
Gain a larger market share
Take over other businesses
Open up new stores
Increase the workforce
31
Q

What are the targets for a struggling business

A
Decrease the product range
Exit markets
Achieve enough sales to break even
Improve efficiency
Maintain market share
Reduce costs (close stores or reduce workforce)
32
Q

What is retrenchment?

A

When a business downsizes the scale of its operations

33
Q

When the market is shrinking and the climate is negative what should a business do?

A

Retrenchment

34
Q

When the market is expanding market and the economic climate is positive what should a business do?

A

Grow and increase profits

35
Q

What is globalisation?

A

Where businesses operate internationally and gain a lot of influence or power

36
Q

How does globalisation affect businesses?

A

Imports
Exports
Location

37
Q

How does globalisation affect imports?

A

Allows businesses to import products and raw materials at cheaper prices

38
Q

How does globalisation affect exports?

A

Allows access to more markets

39
Q

How does globalisation affect location?

A

It allows the business to place specific parts of the company in specific parts of the world

40
Q

What is a multinational company?

A

A large company with facilities and markets around the world

41
Q

What are the benefits of globalisation for businesses?

A

New market opportunities

Access to technology and resources

42
Q

What are the drawbacks of globalisation for businesses?

A

Threat from foreign competition

Challenge of adapting products and services to meet the needs of foreign consumers

43
Q

Define the term ‘globalisation’?

A

Globalisation is the process of the world becoming ever more interconnected through communication, trade and culture

44
Q

What is international trade?

A

The exchange of goods and services between countries

45
Q

What is free trade?

A

When there are no barriers to trade between countries

46
Q

What is protectionism?

A

When there are barriers to trade between countries

47
Q

What are methods of trade barriers?

A
Tariffs
Quotas
Subsidies
Trade blocs
Non-tarrif barriers
48
Q

What are tariffs?

A

Taxes on imports

49
Q

What are subsidies?

A

Money given to help domestic producers

50
Q

What are trade blocs?

A

Groups promoting trade between a small group of countries

51
Q

What are non-tariff barriers?

A

Methods of imposing such hard qualities that have to be met, products aren’t imported

52
Q

What are examples of non-tariff barriers?

A

Imposing such high quality or safety standards

53
Q

What are reasons for trade barriers?

A

Protecting jobs in domestic industries
Protecting emerging industries
Preventing the dumping of cheap goods on the domestic market
Raising revenue from tariffs

54
Q

State two reasons for imposing trade restrictions?

A
Any two from:
Protecting jobs in domestic industries
Protecting emerging industries
Preventing the dumping of cheap goods on the domestic market
Raising revenue from tariffs
55
Q

What is glocalisation?

A

A business changing products to match the countries’ cultural differences, tastes and legal requirements

56
Q

Why is e-commerce good for global companies?

A

Ability to sell 24/7

No need to distribute or sell their products through foreign retailers

57
Q

How do businesses change the product to compete internationally?

A

Change technological components (eg. sockets0
Change taste to meet the culture
Change components to meet safety regulations

58
Q

How do businesses change the price to compete internationally?

A

Change price to consider tariffs
Comply with different tax laws
Account for currency conversions
Account for incomes in foreign countries

59
Q

How do businesses change the promotion to compete internationally?

A

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

60
Q

What is a trade-off?

A

When something is given up in order to gain or achieve something else

61
Q

What are pressure groups?

A

Organisations that try to make businesses change their behaviour or operations

62
Q

How do pressure groups impact businesses’ products?

A

Make them use sustainable products and ensure all products are safe

63
Q

How do pressure groups impact businesses’ price?

A

Increase the price paid to small supplies

64
Q

How do pressure groups impact businesses’ place?

A

Source local products

65
Q

How do pressure groups impact businesses’ promotion?

A

Provide accurate information on packaging and make them obey advertising legislation

66
Q

Which two of the following are not examples of ethical behaviour by a business?
Select two answers:
A - Paying employees a fair wages
B - Paying a low price to suppliers
C - Placing full details of product content on packaging
D - Carefully disposing of waste
E - Using non-renewable resources

A

B - Paying a low price to suppliers

E - Using non-renewable resources

67
Q

What are examples of ethical behaviour by businesses?

A

Treating workers and suppliers fairly
Being honest with customers
Ethical sourcing of materials
Investing in the community
Meeting government requirements and legislation
Caring for the environment and operating sustainably

68
Q

Give one method a pressure group could use to presuade a business to act responsibly

A

Lobbying, protests, letters, ruining of reputations and boycotts

69
Q

What are short-term environmental impact from businesses?

A

Traffic congestion through transport and deliveries

Air, noise and water pollution through manufacturing and industry

70
Q

What are short-term environmental impact from businesses?

A

Climate change

Depletion of land, food and natural resources

71
Q

How do businesses reduce environmental impacts?

A
By:
Using renewable energy
Replenishing and conserving natural resources
Using biodegradable packaging
Reducing food miles
Partaking in social enterprises
72
Q

How can consumers becoming more environmentally aware be seen as good?

A

Allows the opportunity to provide a USP to customers about being green

73
Q

How can consumers becoming more environmentally aware be seen as bad?

A

If not ‘green’ may result in loss of customers and cost extra money to follow the trend

74
Q

Give two impacts a business might have on the environment

A

Any two from:
Traffic congestion through transport and deliveries
Air, noise and water pollution through manufacturing and industry
Climate change
Depletion of land, food and natural resources