Unit 3 Business growth Flashcards
What are ways if measuring the size of a business
Value of the business- cost to buy it
Revenue/turnover- annual sales not including cash.
Profit- annual
Market share- % of people in the market it is in are its customers
What is the definition of internal growth
When a business grows on its own. No other businesses are involved. It is because of its own actions that the business grows.
How can a business grow internally
One way is to improve the marketing mix which would lead to repeat sales, a bigger market share and a larger profit.
Another way is to innovate as this produces new products which may cause a rise in revenue.
What is the definition of external growth
When other businesses are involved
How can a business grow externally
By purchasing another business and incorporating it into the other one. Called a TAKEOVER.
Joining forces with another business and taking a share of each others profits is another way and is called a MERGER.
What is the definition of economies of scale
The benefits of business growth
What is the definition of diseconomies of scale
The drawbacks of business growth
What are examples of economies of scale
Bulk buying is cheaper
It is easier to get finance as banks are more willing to let you borrow money.
You will have access to specialized workers who increase efficiency and productivity.
What are examples of diseconomies of scale
Staff do not feel a part of the business so productivity decreases as motivation for employees falls which may result in them quitting.
Communication becomes difficult and slow meaning important to innovative ideas can not be passed on so the business may miss an opportunity.
How do businesses avoid diseconomies of scale
Planning recruitment and training in advance
Investing in new technology to speed up communication
Having a flexible structure so that they can respond to change
What is the definition of a monopoly
And business that owns more that 25% of a market and can INFLUENCE the market.
What are the negatives of monopolies
They can charge high prices
Standards of products slip
Buy rivals and discontinue their products
Lose touch with development
What are the positives of monopolies
They have a lot of experience in the market
Safety is paramount
Standardized
What is the definition of collusion or cartel
Monopolies that are illegal are known as collisions. This is where more than one business works together to benefit themselves. This is controlled by a number of regulations.
What is the definition of a natural monopoly
What’s market conditions dictate that it is in everyone’s best interest for the business to be in a monopoly position
What is the definition of regulation
When limitations are put in place to ensure customers are treated fairly and receive a quality product or service. They are measures put in place to ensure fair, safe and responsible practices by businesses.
What factors can be regulated
Price
Quality standards
Preventing businesses from acting in socially unacceptable ways
Making business provide for customers in hard to reach areas
What are the positives and negatives of having no regulations
There are no positives to the consumer.
Negatives are that customers would be vulnerable and would not be able to get refunds
What is the definition of self regulation
When a company makes their own guidelines and can set rules internally.
What are the advantages and disadvantages of self regulation
+ Any regulation is in the customers interest
It means that customers can take businesses to court.
_ it is not legal for businesses to follow their own rules.
What is the definition of government regulations
Laws that are passed to government to force regulation in to businesses and protects the consumer.
What are the advantages and disadvantages of government regulations
+ customers will get legal protection and can have confidence in them.
_ businesses say that in order to meet regulations they have to cut production and invest in technology.
What do the competition commission do
They regulate takeovers and mergers where there is a risk of the merging two businesses having an unfair amount of market control.
What is a protection pressure group
And pressure group that exists to fight a SPECIFIC issue
