Business Growth

• What is one benefit of a business owning its own shops?

  Control over how products are sold
• What is one problem a business faces from owning its own shops?

  Fewer customers and selling opportunities
• What is a benefit of owning shops regarding pricing?

  Control over selling price
• How does owning shops maximize profit?

  Profit is made from sales and production
• What type of feedback do businesses get from owning their shops?

  Immediate feedback from customers
• What is a problem related to staff training for businesses owning shops?

  Cost of training and recruitment
• What is a potential issue with leftover stock for producers?

  It can become a problem for producers
• How can the success of a business be measured?

  Through profits and profit and loss account
• What does an increase in sales indicate?

  Improved marketing effectiveness
• What does low staff turnover indicate?

  Employer loyalty and job satisfaction
• What are the benefits of expansion through franchising?

  • Many franchises already exist
  • Receipt of royalties
  • No need to find finance or sites
  • Quick market and sales expansion
  • Relatively cheap expansion
  • Franchisee manages employees
  • Benefits from franchisee enthusiasm
  • No losses from individual outlets
  • Lower operational costs
  • Risk spreading
• What are the benefits of opening own shops for expansion?

  • Retain independence and control
  • Keep all profits
  • More control over quality
  • Avoid training and administration costs
  • Benefit from economies of scale
• What is a franchisor?

  A business allowing others to sell its goods
• What is one advantage for a franchisor?

  Enables growth with less risk
• What is a disadvantage for a franchisor?

  Less control over franchised outlets
• What is a franchisee?

  A business paying royalties to sell goods
• What is one advantage for a franchisee?

  Well-known name attracts more customers
• What is a disadvantage for a franchisee?

  Monthly royalties may reduce profits
• What are the types of integration in business?

  • Conglomerate Integration
  • Horizontal Integration
  • Vertical Backwards Integration
  • Vertical Forwards Integration
• What is the benefit of owning businesses at different production stages?

  Control over production quality and costs
• What is internal economies of scale?

  Benefits gained from being a large business
• What are the advantages of internal (organic) growth?

  • Less risk than external growth
  • Financed through internal funds
  • Builds on existing strengths
  • Allows sensible long-term growth
• Why do businesses decide to grow?

  • Increase market share
  • Increase sales and profits
  • Achieve economies of scale
  • Gain competitive advantage
  • Spread risk across markets
• What is external growth in business?

  Increasing size by buying other businesses
• What is a merger?

  Joining two or more businesses together
• What is a disadvantage of a merger or takeover?

  It may create bad feelings among workforce
• What is the effect of a takeover on customers?

  May lead to lower prices due to economies of scale
• How can the size of a business be measured?

  By the value of sales or number of employees
• What does an increase in market share indicate?

  Greater profits and competitive advantage
• What is the purpose of diversification for a business?

  To spread risks across different markets
• What is the impact of a takeover on shareholders?

  Higher dividends and share value potential
• What is the role of a franchisor?

  To allow franchisees to sell using their name
• What is a potential disadvantage of being a franchisee?

  Set up costs paid to franchisor
• What is the benefit of economies of scale?

  Lower unit costs as production increases
• What does internal growth allow a business to do?

  Grow at a more sensible rate
• What is a potential risk of external growth?

  It may not always work effectively
• What is the significance of customer feedback for a business?

  Indicates customer satisfaction and areas for improvement
• What is the impact of economies of scale on marketing?

  Can afford more expensive advertising campaigns
• What does a business gain from diversification?

  Reduced risks from market failures
• What is the effect of a takeover on workers?

  May lead to job losses or relocations