Topic 2.1 Growing A Business 📍 Flashcards
Methods of business growth?
Organic growth - internal growth
Inorganic growth - external growth
How do businesses use organic growth? (4)
- Development of new products
- Entering a new market
- Changing marketing mix
- Using tech
What are the advantages of organic growth?
- Increase in customers increase in sales revenue + profit
- More production -> benefit from economies of sale
- More control over business reflecting on your business culture
- Gain more influence -> can set prices for market share
Disadvantages for organic growth
- Takes a long time
- Expensive - risky
What are the positives of inorganic growth?
- Greater quality of products
- Customer needs being met
- Higher market share gained
- More income so dents are paid off more
What are the two types of inorganic methods
Takeover - get bought by another business
Horizontal Merger- merge with another business in same market
Vertical- join via supply chains
What are the negatives of of inorganic Growth?
- Jobs made redundant
- Less choice for customers
- Clash of cultures - risk merger to fail
- Lack of communication
- Diseconomy of scale
How does inorganic growth take place in a PLC ?
Public can buy shares of your business and use the stock exchange to raise funds
What are the advantages of using inorganic growth as a plc ?
- Limited liability
- Good public profile - banks willing to lend loans
- Easy to raise capital
Disadvantages of using inorganic growth as a PLC?
- Ownerships shared between shareholders - more likely to be a hostile takeover
- Expensive / complicated prepare annual accounts
- Everything is visible for your competitors to see
What are the internal sources of finance?
Retained profit
Sales of assets
Positives and negatives of using sales of assets?
Positives - releases trapped money
No interest
Negatives- sell it for less than you bought it still a loss
No longer on balance sheet - drives away investors
Money not available immediately
Positives and negatives of retained profit
Positive - no interest
Freedom of chioce
Tax break
Negatives- one time opportun- can only be spent once
Positives and negatives of a bank loan
Positives - low rate of interest as a well known business
Negative - interest still needs to be paid
Positives and negatives of using share capital ?
Positives - no interest
Easy
Negative - dilutes ownership
Entitled to dividends so may lose most money
What are positives of becoming a PLC ?
Ability to raise finance through share capital
Limited liability
Good public awareness
Seen as reliable
What are negative did becoming a PLC?
More complex procedures
Risk of hostile take over
Increase public attention
Dilute ownerships
Less privacy
What are the internal sources of finance ?
Sales of assets
Positives - no interest
Negatives
May make less as asset has devalued
No immediate
Less assets - less opportunity for partnerships
Retained profit - saving profit
Positives - no interest
Negative - takes a while to accumulate- may miss out on opportunities
What are the external sources of finance ?
loan capital 🏦- money form bank
Good - secure
Negatives - interest
Shared capital- no interest
Negative - risk take over
What are the four main external influences that make us a business to change their objectives?
Legislation
market conditions
technology
competitors
How may the external influence of competitors cause a business to change their objectives?
If a new competitor enters the market it will lead to high levels of competition that needs to be completed with
this will lead to the business change the objectives to be more competitive
How can the external influence of legislation affect our businesses objectives?
Legislations may change the creations of services and products and restrict the businesses operations or create new opportunities to incorporate them into objective
How may the external implement of market conditions affect the businesses objectives?
The economic climate may affect how consumers spend if demand is high and low this will affect the ambition of the businesses objectives
How may the external influence of technology affect the businesses objectives?
Technology may create a new opportunity or innovation
What are the three internal reasons why businesses objectives change?
Performance, leadership and culture
What are the reasons that performance leadership and culture may change a business objective?
A new objective effect on the previous performance of the business and the change of work in culture and or business leaders may may also affect the objectives
What are the targets for growing business? 5)
Increase profit
increase market share
Enter an new market
open your store
increasing workforce
What are the targets for a struggling business 4)
Achieve break even sales
exit markets
decrease product range
reduce costs
What is retrenchment?
The business downsize is the scale of operations
What are the two things you’re going to look at if you’re in a shrinking market?
Retrenchment and efficiency
What are the two things you’re gonna look at if you’re in an expanding market?
Creating the most profit and growth 
What is globalisation?
When a business operates internationally
What are the shot term impacts on the environment by businesses?
Noise and water is pollution and traffic congestion
What are the long-term impacts on the environment by businesses?
Climate change
Depletion of land resources and food
How can businesses reduce impact of environmental issues? (3)
Reduce food miles
use biodegradable packaging
use renewable energy
What business opportunities can occur from being more environmentally friendly?
Businesses can differentiate their products to make them more to customer needs and make them all greener
What are the three components of the design mix?
Aesthetics – style if it looks good if you could come in multiple colours
Cost – if it varies with the quality of the product and function
Function – how it tastes how it works
How can we be ethical with the place?
Source locally
What are the 6 things that can influence the pricing strategies?
Tech- make it cheaper to produce- more competitive
Branding -products with a strong brand and demand with a higher price due to value desirability
Cost – if the profit margin is low it’s gonna affect the kind of person strategy that they go for
Product life cycle
Market segment – it depends what kind if your expensive or not 
CompetitorsHave to consider their position on the pricing-
