Unit 2 - The Business Organisation

Question 0

What can internal expansion also be called?

Answer 0

Organic growth.

Question 1

Why might a business one to expand give at least four various reasons ?

Answer 1

Economies of scale- larger firms can produce at a lower average cost Danny smaller firms they can pass on these economies of scale is to consumers as lower prices to help increase their sells their market share and their profits.

Diversification larger firms can afford to produce more products and smaller firm.They can sell into different markets and so reduce The risk that a decline in sale of one product will harm the business this means less threat left profits

Financial support larger firms are less likely to go bust then small firms this is because they can borrow the money more easily from the banks so will find it easier to survive cash flow problems.larger firms are also more likely to receive financial support from the government then smaller firms because they employ lots of people .

Personal vanity

Question 2

What are the three main methods of external growth ?

Answer 2

The firm can produce more of its current products to sell in its existing markets

The firm can sell its common products into new markets

The firm could launch a new product

Question 3

What are the advantages of internal expansion ?

Answer 3

Internal growth is good because it is relatively expensive to achieve

The expectation of diversifying into a completely new products the firm expands by doing more of what it is already good at

Question 4

What are the disadvantages of internal expansion ?

Answer 4

It can take a long time to achieve growth some of its owners are not prepared to wait that long and this is why do go for a external growth

Question 5

What does external growth mean ?

Answer 5

External growth is when a business joins together with another business

Question 6

What is another word for external growth

Answer 6

Integration

Question 7

What are the two ways of achieving external expansion?

Answer 7

A merge- occurs when two or more businesses joined to form a new business

A takeover-occurs when one business gains control of another

Question 8

What does horizontal integration mean?

Answer 8

This occurs when one firm joins with another firm at the same stage of the same production process

Question 9

What was vertical integration mean?

• backward verticals integration?
• forward vertical integration ?

Answer 9

This occurs when one firm joins with another firm at a different stage of the production process

Backward vertical integration is when a firm joins with its suppliers And forward vertical integration is when the firm joins with its distributors

Question 10

What does Conglomerate integration mean

Answer 10

This occurs when one firm joins together with another firm in a different type of production process

Question 11

What is an advantage of horizontal integration ?

Answer 11

It can lead to economies of scale is more of the same kind of outpull is being produced

Question 12

What is an advantage to vertical integration ?

Answer 12

It in a short of firm keep control of its supplies or distribution which can improve quality and reliability and reduce cost

Question 13

Define the definition of economies of scale

Answer 13

This is when the cost per unit falls as a business expands

Question 14

What is an advantage over conglomerate integration?

Answer 14

Can it spread risks as a firm is operating in more than one market

Question 15

What is an overall disadvantage of integration

Answer 15

Diseconomies of scale is are the problem involved when controlling communicating and motivating staff in a bigger business

Culture clashes can’t occur because firms are used to doing things in different ways

Question 16

What is a franchisee?

Answer 16

When one business sells to write to another business to use its name and so its products

Question 17

What are some advantages of selling a franchisee ?

Answer 17

There franchisor gets a free from the franchisee and a percentage of the profits

The franchisee provides most of the finance to set up the new outlet this means the overall business can grow much faster than if the original business had to provide all that money for new stores

The franchisee takes a manger proportion of the profits and so should be very motivated to make the business a great success this way everyone can benefit

Question 18

What are some disadvantages of selling franchisees ?

Answer 18

The original entropy no is no longer owned the entire business and most of the profits go to the franchisee

Is there are quality problems of one franchisee this can damaged the whole business

Question 19

What does public limited company mean?

Answer 19

Is when its shares are advertised and can be listed on the stock exchange market allowing any member of the public to buy shares in the company

Question 20

What are advantages of public limited company?

Answer 20

They have Limited liability

Can advertise a show to the general public this means it has greater number of potential investors in a private limited company therefore it may be possible to raise large sum of money by selling shares

Plc companies are usually full of having more status than Private companies

More media coverage–> more shareholders

Question 21

What are the disadvantages of becoming a public limited company?

Answer 21

more media coverage can be good it can also be bad because if the company makes a mistake or does something wrong demijohn more likely to cover the story then if the company was a Private Limited

Because PLC cannot control who buys it shares managers may find that a competitor buys control of the company and takes it over

Divorce of ownership and control

Shareholders January point to make as much profit as possible which can make it difficult for A PLC to pursue other objectives like helping the environment

Question 22

What is a private limited company?

Answer 22

Is when the company cannot publicly advertise it shares will sell and is often owned by family members

Question 23

What are some main aims and objectives that might change as the business grows

Answer 23

Growth = once the business is established the owners of some firm to one-day business to get bigger

Marketshare = a business may set yourself to top target of becoming the dominant firm in the industry i.e. having the highest marketshare

Innovation = a business will start up with a limited range of products and services. Once the business has established itself, the owner and managers may set targets to increase the number of new products on the market.

Diversification = this occurs when a firm moves into new markets

Going international

Question 24

How can go in international be attractive as a business? (Advantages )

Answer 24

It gives the business additional potential customers

It may reduce the risk if a business only sells in one country and our country has problems the business might be in big trouble

It allows growth went further expansions in the UK becomes problematic

It can offer a growing market

Question 25

What does business ethics mean? I

Answer 25

This refers to whether a business division is seen as morally right or wrong and ethnical division is made on the basis of what you think is right

Question 26

What are some social cost of businesses

Answer 26

Businesses can have environmental cost i.e. they can damage the environment

Some businesses make products that can be harmful to people’s health e.g. tobacco and alcohol the government has to spend money to treat illness caused by these products

Business activities for example some people for that certain businesses unfairly exploit cheap labour in developing countries

Question 27

Are some of the social benefits of businesses ?

Answer 27

Taxes on businesses profits help pay for government services like schools and hospitals

Businesses provide jobs for millions of people

They provide all sorts of essential services to help keep the country moving e.g. transport services electricity

Question 28

How can social issues affect businesses decision?

Answer 28

Some firms now import their war materials from fair trade sources

Many firms are changing their products and packaging to become more environmentally friendly

Businesses are trying to operate in a more Sustainable way they are using renewable energy resource and we recycling more of the waste