Topic 1: business growth and decline Flashcards
bussiness prelim
what is the business life cycle
it shows the phases that every business will go through during it’s life
name the phases in the business life cycle(4)
establishment
growth
maturity
postmaturity
what happens in the establishment phase
when the business enters the market
what are some key considerations during the establishment phase(4)
location
products
staff
legal structure
what are sales like during the establishment phase(2)
low
little customer base
what are costs do you need to consider during the establishment phase.(4)
acquire premises
equipment
stock and raw material
high costs
what are profits like in the establishment phase(2)
low
perhaps negative
what goals should be considered during the establishment phase
to survive
breakeven
what happens during the growth phase
it’s when the business increases in sales
key considerations/decisions that a business should keep in mind during the growth period (5)
developing budgets liquidity marketing structure staffing
what are sales like during the growth period(1)
rapidly increasing
what are cost like during the growth period(1)
decreasing - bulk purchasing
what are profits like during the growth period(1)
increasing
what goals should a business consider during the growth period(1)
longer term planning
how can growth occur(3)
expanding
merging
acquisition
how do mergers occur
when the owners of two separate businesses decide to combine their resources to form a new organisation
how do acquisitions occur
acquisitions happen when one business takes control of another(takeover) by purchasing the majority share
name types of integration(5)
vertical integration:
backward vertical integration
forward vertical integration
Horizontal integration
Diversification
what is vertical integration
it is when a business expands at different but related levels in the production process. There are two types of vertical integration forward and backward.
what is backward vertical integration
it is when the business goes backwards in the chain of production. E.g a business buying there supplier.
what is forward vertical integration
it is when a business integrates with a firm it sells to
what is horizontal integration
it is when a business acquires or merges with another firm that makes/sells similar goods
what is diversification
it is when a business acquires or merges with an unrelated industry
what happens during the maturity phase
the business’s growth and market share begin to slow
issues faced in maturity phase
other firms try to emulate/copy.
what is post maturity
it is a decision the business takes that decides what they want to do after maturity, from this they can pick from 4 options
what are the 4 options in post maturity
renewal
decline
steady state
cessation
what happens in renewal
the business re-invents itself and will experiences a 2nd growth phase
how does a business go through renewal
through offering new products or makeover there existing business image
what happens in steady state
the business maintains it’s market share, and try to avoid decline but do not seek renewal or re-invent the bussiness
what do you need to be weary about if you go into steady state
the business must maintain it’s market share and must be wary of competition.
what happens during decline
the business has been unsuccessful in addressing the various challenges.
how can a business go through decline
through the loss of it’s competitive edge
what is ceassation
the closure of a business
why would someone go through ceasation
they would go through it because of many factors, they could be forced due to many factors, or the owner may go through voluntary cessation
reasons for forced cessation(2)
financial difficulties
bankruptcy
reasons for voluntary cessation(3)
loss of enthusiasm
retire
another party would like to buy the business
how can a business lose there competitive edge (3)
failure to meet customer needs
lack of demand
failure to plan
list 3 businesses that failed to adapt
Nokia
dick smith
quicksilver
