Unit 1 - 1.6 - Business Growth Flashcards
What are the four ways in which organic growth can take place?
- Increased capacity
- Increased sales
- Increased market share
- New advertising campaigns
These methods of organic growth are interconnected and can influence one another.
True or False: The examples of growth described in the diagram are independent of each other.
False
The examples of growth are interconnected, meaning one can affect another.
Fill in the blank: A business may increase its capacity because it has _______.
[increased its sales]
Fill in the blank: A firm may increase its sales because its market share has increased as a result of a _______.
[new advertising campaign]
What is the relationship between increased sales and market share?
Increased sales can result from an increased market share.
What does capacity refer to in the context of a factory or shop?
How much output it can produce or sell
What is organic growth in a business?
Concerned with the internal growth of a business, for example, by increasing its sales
How can a business increase output?
A business can increase the amount it produces by using resources more efficiently, using up spare capacity, or increasing the capacity of the business.
What are ways to use resources more efficiently?
Using new technology or training workers.
How can a business use up spare capacity?
By utilizing unused factory space.
What does increasing the capacity of the business involve?
Building a new factory or opening new shops.
How can a business gain new customers?
By reducing its prices, opening new shops in different locations, or better marketing.
What is an example of better marketing?
A bigger, more effective advertising campaign.
How can a business develop new products?
By researching and developing, copying the ideas of other businesses, or buying ideas from other businesses.
How can a business increase market share?
By increasing its own sales or taking business from other firms.
What happens to market share if a firm keeps sales constant?
A firm’s market share would rise if other businesses sell less.
What is external growth?
The growth of a business by takeover or merger.
External growth is a strategy used by companies to expand their operations and market presence.
What is a merger?
Where two or more businesses agree to join to become one business.
Mergers can involve companies of similar sizes or different sizes.
What is a takeover?
Where a business takes a controlling interest in another business, for example, by buying more than 50% of the shares in it.
Takeovers can be friendly or hostile, depending on the willingness of the target company.
What is diversification in a business context?
When a business merges with or takes over another business with which it has no connection.
What is horizontal growth?
A merger or takeover where the two businesses are involved in a similar operation.
This type of growth allows companies to consolidate resources and expand their market share.
What is backward vertical growth?
When a business merges with, or takes over, a business that supplies it with goods or services.
What is forward vertical growth?
When a business merges with, or takes over, a business that it supplies goods or services to.
