Topic 2.1 growing the business Flashcards
What are the 2 ways a business can expand?
Internal growth and external growth (organic and inorganic growth)
What are the 2 methods of internal growth
- New market
- New products
What is the cost and speed of internal growth?
cheap
slow
What is the advantages and disadvantages of new products?
Advantage:
- increase product range
- Better meets customer needs (USP)
Overall increases revenue and sales.
Disadvantages:
- Research and development will be expensive
- time consuming - risky due to dynamic nature - changes in customer needs and changes in technology
What is the advantages and disadvantages of new markets?
Advantage:
- adapting to the marketing mix eg. promotion or change of selling such as ecommerce.
Disadvantage:
- Depends on the product within the product life cycle
IF INTERNATION MARKET:
- exchange rate
- trade barriers
What are the 2 methods of external growth?
Merger and takeovers
What is a merger?
When two or more businesses agree to join up and work as one business.
What is a takeover?
When one business buys out another. To take over a company it is by buying majority of the business shares
What is the cost and speed of external growth?
Expensive
fast
Why would a business consider doing a takeover or merger?
- To get economies of scale
- increase market share
- secure suppliers
- reduce risks
- acquire knowledge
- acquire talent
What is a public limited companies (PLC)?
They are able to raise capital through selling shares on the stock exchange.
What is the benefit and drawback of being a PLC?
advantages:
- ability to raise capital through share capital
- limited liability
- reliable
- creates greater public awareness of the business
Disadvantages:
- risk of takeovers
- less privacy around financial performance
- greater influence on decision making by external shareholders
What are the 2 internal sources of finance
- sale of assets - when the business has assets that are no longer needed and decide to sell it
- Retained profit - the business own money saved by revenue
What are the 2 external sources of finance
- loan capital - a long term bank loan
- Share capital - Used when becoming a PLC but has risk of takeovers.
What are the 3 ways globalisation effects a business?
- imports
- exports
- location
What is imports?
The flow of goods into one country from another country
What is exports?
The flow of goods out of one country to another country.
What are the advantage of globalisation?
- easier to sell products abroad
- access to cheaper raw materials
- access to cheaper labour
What are the disadvantages of globalisation?
- increase in competition
- exchange rates can impact sales
- risks of becoming unethical
What is a tariff?
A tax on imports
What is a a trade bloc?
When different countries agree to act together to promote trade among themselves. This also encourages trade between the countries. Such as the North American Free trade association.
Business departments which ethics can impact
- Marketing - eg. inappropriate ads for children
- operation - eg. exploiting producers at developing countries (payments - low)
- Human resources - eg zero hour contacts
- Finance - Using tax havens to afford or pay less tax.
What are the disadvantage of a business being ethical?
Lower profits
increase in prices - may lead to less demands
Evaluation of ethics
- Adapting marketing if you use business practice - eg promote the fact that your business uses fair trade
- Ethical human resources - lead to more motivation.
Pressure group impact on business (ethics)
Can cause bad reputation for the business
