Topic 2.1 growing the business

Question 1

What are the 2 ways a business can expand?

Answer 1

Internal growth and external growth (organic and inorganic growth)

Question 2

What are the 2 methods of internal growth

Answer 2

• New market

- New products

Question 3

What is the cost and speed of internal growth?

Answer 3

cheap

slow

Question 4

What is the advantages and disadvantages of new products?

Answer 4

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

Question 5

What is the advantages and disadvantages of new markets?

Answer 5

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

Question 6

What are the 2 methods of external growth?

Answer 6

Merger and takeovers

Question 7

What is a merger?

Answer 7

When two or more businesses agree to join up and work as one business.

Question 8

What is a takeover?

Answer 8

When one business buys out another. To take over a company it is by buying majority of the business shares

Question 9

What is the cost and speed of external growth?

Answer 9

Expensive

fast

Question 10

Why would a business consider doing a takeover or merger?

Answer 10

• To get economies of scale
• increase market share
• secure suppliers
• reduce risks
• acquire knowledge
• acquire talent

Question 11

What is a public limited companies (PLC)?

Answer 11

They are able to raise capital through selling shares on the stock exchange.

Question 12

What is the benefit and drawback of being a PLC?

Answer 12

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

Question 13

What are the 2 internal sources of finance

Answer 13

• 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

Question 14

What are the 2 external sources of finance

Answer 14

• loan capital - a long term bank loan

- Share capital - Used when becoming a PLC but has risk of takeovers.

Question 15

What are the 3 ways globalisation effects a business?

Answer 15

• imports
• exports
• location

Question 16

What is imports?

Answer 16

The flow of goods into one country from another country

Question 17

What is exports?

Answer 17

The flow of goods out of one country to another country.

Question 18

What are the advantage of globalisation?

Answer 18

• easier to sell products abroad
• access to cheaper raw materials
• access to cheaper labour

Question 19

What are the disadvantages of globalisation?

Answer 19

• increase in competition
• exchange rates can impact sales
• risks of becoming unethical

Question 20

What is a tariff?

Answer 20

A tax on imports

Question 21

What is a a trade bloc?

Answer 21

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.

Question 22

Business departments which ethics can impact

Answer 22

• 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.

Question 23

What are the disadvantage of a business being ethical?

Answer 23

Lower profits

increase in prices - may lead to less demands

Question 24

Evaluation of ethics

Answer 24

• Adapting marketing if you use business practice - eg promote the fact that your business uses fair trade
• Ethical human resources - lead to more motivation.

Question 25

Pressure group impact on business (ethics)

Answer 25

Can cause bad reputation for the business