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Business - Theme 2 > Topic 2.1 > Flashcards

Topic 2.1 Flashcards

1
Q

Why do firms want to grow?

A
  • Market power motive: higher marketshare -> dominance -> pricing power
  • Cost motive: economies of scale can decrease costs helping to increase profit margins
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2
Q

Organic / internal growth

A

When a business expands on its own operations

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3
Q

Ways of organic growth

A
  • Research and development: new and old products
  • Entering new markets
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4
Q

Organic growth advantages

A
  • Financed through internal funds -> no debt
  • Existing strengths -> maintains culture
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5
Q

Organic growth disadvantages

A
  • Slow growth -> takes longer time to return a return on investment
  • Hard to build market share -> new market will have a leader
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6
Q

Inorganic / external growth

A

When a business merges with or takes over another business

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7
Q

Ways of inorganic growth

A
  • Merger -> 2 businesses join together
  • Takeover -> when one business buys the majority shares in another smaller business
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8
Q

Inorganic growth advantages

A
  • Increased market share -> reduce competition, become dominant, set prices
  • Economies of scales -> buy in bulk -> lower cost, higher profit
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9
Q

Inorganic growth disadvantages

A
  • Clash of cultures ->businesses operate differently, demotivates staff, lower customer satisfaction
  • Communication problems -> business gets bigger, too many employees, harder to control
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10
Q

Types of integration

A

Horizontal - merges with firm in same industry and at same stage of production

Forward vertical - merges with firm in same industry but at later stage of production

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11
Q

Types of integration

A

Backward vertical - merges with firm in sam industry but at earlier stage of production

Conglomerate - merges with a firm in an unrelates industry

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12
Q

Public limited company (PLC) advantages

A
  • Limited liability -> owners cannot get sued, increase in demand for shares, increase the value of share price = more capital
  • Stock market floatation -> able to raise capital easier without risk of debt
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13
Q

Sources of finance: internal

A
  • Retained profit
    PRO: no interest or debt
    CON: once the money is gone, it is not available for future problems
  • Selling assets
    PRO: no longer have to pay for maintenance
    CON: might need the asset in the future
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14
Q

Sources of finance: external

A
  • Loan capital
    PRO: smaller regular repayments are made over time
    CON: banks may also ask for collateral
  • Share capital
    PRO: does not have to be paid and no interest
    CON: dividends will need to be paid
  • Stock market
    PRO: the business can also gain recognition
    CON: losing control
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15
Q

Changes in aims and objectives:
As a business evolves

A
  • Focus on survival or growth
  • Enter or exit new market
  • Change the size of workforce and product range
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16
Q

Changes in aims and objectives:
Internal reasons

A
  • Factors the business can control e.g. business performance, change in management
17
Q

Changes in aims and objectives:
External reasons

A
  • Market conditions
  • Technology
  • Legislation
18
Q

Common business objectives

A
  • Survival
  • Increasing market share
  • Profit maximisation
  • Cost efficiency
19
Q

Globalisation

A

Businesses start operating on an international scale

20
Q

Import

A

A product made overseas and brought into the UK

Products are imported because they cannot easily be manufactured or are cheaper overseas

21
Q

Export

A

A product the UK sells to overseas markets

22
Q

Offshoring

A

The relocation of business activities from the home country to an international one

23
Q

Why offshoring?

A
  • Cheaper labour
  • Better technology
  • More lenient legislation
24
Q

Multinational

A

A business that operates in multiple countries

25
Q

Multinational advantages

A
  • New market opportunities
  • Access to tech and resources
26
Q

Multinational disadvantages

A
  • Threat from foreign competition
  • Challenge adapting products
27
Q

International trade

A

The flow of goods & services between countries

28
Q

Tariff

A

A tax placed on an import to increase it’s prices and decreases it’s demand

PRO: protects local businesses, revenue for the government
CON: may start trade war (other countries may impose tariffs)

29
Q

Trade bloc

A

A group of countries who make a trade agreement not to place tariffs on imports between member countries

PRO: creates good relationship with other countries in the bloc
CON: can only be part of one bloc

30
Q

Exchange rate

A

The value of one currency in terms of another

31
Q

Glocalisation

A

Changing products in order to adapt to other countries’ cultural differences, tastes and legal requirements

32
Q

To compete on a global scale…

A

Businesses can use the internet and e-commerce

  • open 24/7
  • cheaper than physical store
  • access to wider customer base
33
Q

Changing the marketing mix to compete on a global scale

A

Product: adapt to suit locals
Place: reliable transportation method
Price: adjusted to foreign wage rates
Promotion: right promo to encourage sales

34
Q

Ethics

A

The understanding of morals (hight and wrong)

35
Q

Trade - off

A

Compromise between ethics and profit

36
Q

Ethical trading

A

Advantages:
- Better reputation -> more sales
- Improved employee motivation

Disadvantages:
- Higher costs
- Potential for inaccurate claims

37
Q

Pressure group

A

Organisations who try to influence/ inform consumers about unethical activities a business may partake in

38
Q

Impact of pressure groups on marketing mix

A

Product: use sustainable resources
Price: increase the price paid to small suppliers
Promotion: provide accurate information
Place: use sustainable methods for distribution

39
Q

How to reduce environmental impacts:

A
  • Biodegradable packaging
  • Use renewable energy sources

Business - Theme 2 (5 decks)

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