Unit 2- The Business Organisation Flashcards
Explain 5 reasons why firms choose to expand
Economies of scale Diversification Financial support Personal vanity Domination of the market
Give one benefit and problem of internal expansion
It is relatively inexpensive to achieve.
The problem is that it can take a long time to achieve growth.
What’s the difference between internal and external expansion?
Internal- when a firm grows by expanding their own activities.
External- when a firm takeovers or merges with another firm.
How do private and public limited companies differ in the way that their shares can be sold?
Private limited companies can only sell new shares if all of the current shareholders agree.
Whereas a public limited company allows any member of the public to buy shares in the company.
Advantage and disadvantage of becoming a PLC
Still have limited liability.
Someone may buy enough shares to take over the company.
What is “divorce of ownership and control”
When shareholders own the company, but a different group of people control the day to day running of the company.
Describe two social costs and two social benefits of business activity?
Businesses can have a environmental costs .
Products that may be harmful to people’s health.
Businesses provide jobs for lots of people.
They provide all sorts of essential services.
The good and bad of a business developing a “green image”
Taking ethical and environmental issues seriously can give firms new customers and increase in sales. However using fair trade materials is expensive.
Give three advantages of operating as an MNE
By producing in various countries they can keep transport costs to a minimum.
They can increase their knowledge of local market conditions.
Gain access to cheap raw materials.
2 pros and cons for a country of hosting an MNE
MNEs create employment for locals
Access to foreign technology
Jobs created by MNEs are often bad
Might drive out local industries
