2.1 Growing the Business

• What is internal/organic growth?

  When a business grows by expanding its own activities
• Advantages of internal/organic growth?

  • Low risk
  • Inexpensive
  • New staff are trained well
• Disadvantages of internal/organic growth?

  • Grows slowly
  • Have to keep good quality reputation
• Ways a business can grow internally?

  • Targeting new markets
  • Developing new products
• How do you finance growth?

  • When it expands the output will increase
  • Costs will increase at a slower rate than output
  • Economies of scale decrease
  • More profits can be made per item
  • Profits can be reinvested into the business
• What is external/inorganic growth?

  Involving a merger or a takeover in order to grow
• Advantages of external/inorganic growth?

  • Bigger market share
  • Greater access to customers
  • Become a stronger competitor
• Disadvantages of external/inorganic growth?

  • Risky
  • Can be unsuccessful
  • Lead to costs cut
• What is a merger?

  Two or more firms joining together to form a new larger firm
• What is an acquisition?

  An asset or object bought or obtained
• What is retained profit?

  Profits that are put back into the business
• What is loan capital?

  Taking out a loan and paying back over a fixed period of time with interest
• What is selling assets?

  Selling things that the business no longer needs
• What is share capital?

  Money raised by selling shares in a business
• What is stock market flotation?

  Start selling shares on the stock market
• What ownership structure may a growing business take?

  Internal/organic or external/inorganic growth
• What is PLC?

  Public limited company

  when a business structure is incorporated and has shares that can be bought or sold by anyone
• Advantages of a PLC?

  • Helps the business expand
  • Has limited liability
• Disadvantages of a PLC?

  • Could by too many shares and takeover
  • Accounts have to be more public
• What is an import?

  Products going into a country
• What is an export?

  Products going out a country
• Why do businesses aims and objectives change as they grow?

  • Keep up with the dynamic business environment
  • Changes in technology
  • Changes in market conditions
• What could new objectives look like for a growing business?

  • Size of its product range
  • Entering/exiting new markets
  • Size of its workforce
• What are ethics?

  Moral principles of right and wrong
• What is trade off?

  Between behaving ethically and making the most profits for a firm
• What is a pressure group?

  Organisations that tries to influence what people think about a certain subject
• What is a tariff?

  Takes goods that are being imported/exported
• What is a trade block?

  Groups of countries that have few or no trade barriers
• What is globalisation?

  The process of businesses and countries becoming more connected
• What impacts has globalisation had on businesses?

  • International trade
  • Compete with other businesses internationally