2.1

• What is the focus of Edexcel GCSE Business 2.1?

  Growing the Business
• What are the two types of business growth?

  • Internal (Organic) Business Growth
  • External (Inorganic) Business Growth
• Why do many firms seek to grow?

  To become large companies or multinationals
• What is one reason owners desire business growth?

  To achieve higher market share and profitability
• What does stronger market power allow a business to do?

  Control over customers and suppliers
• How can businesses reduce costs through growth?

  By benefiting from lower unit costs
• What opportunities does growth provide for businesses?

  Product diversification
• Why do larger firms have easier access to finance?

  Due to their established market presence
• What are the two methods of achieving business growth?

  Organically or inorganically
• What does retrenchment involve?

  Scaling down operations
• What is the difference between profit and profitability?

  Profit is absolute money; profitability is efficiency
• How is profitability usually expressed?

  As a percentage
• How is profitability calculated?

  Profit divided by revenue
• What can retrenchment help a business achieve?

  Reduce costs and survive
• What drives organic growth?

  Internal expansion using reinvested profits
• What are common methods of generating organic growth?

  Gaining market share and product diversification
• How did Apple achieve organic growth?

  By opening stores in new countries
• What strategy did Google use for organic growth?

  Product innovation
• How did Disney diversify its business?

  By expanding into theme parks and networks
• What does product diversification do for a business?

  Opens up new revenue streams
• What might firms invest in to create new revenue streams?

  Research and development
• What is the purpose of integration in business growth?

  To speed up growth and face challenges
• What are the advantages and disadvantages of internal (organic) growth?

  Advantages:

  • Manageable growth pace
  • Less risky financing
  • Existing business expertise

  
  

  Disadvantages:

  • Slow growth pace
  • Limited access to finance
  • No bulk purchasing discounts
• What is external (inorganic) growth?

  Growth through mergers or takeovers
• What happens during a merger?

  Two companies combine to form a new entity
• What is a takeover?

  One company purchases another company
• What is a strategic fit in mergers?

  Expanding into new markets or diversifying
• How do larger companies achieve lower unit costs?

  Through bulk purchase discounts
• What are synergies in the context of mergers?

  Benefits from combining companies
• How can takeovers eliminate competition?

  By increasing market share of the acquirer
• What is one benefit of mergers for shareholders?

  Increased profits and dividends
• What are the advantages and disadvantages of vertical and horizontal integration?

  Vertical Integration Advantages:

  • Reduces production costs
  • Greater control over supply chain
  • Quality control of raw materials

  
  

  Vertical Integration Disadvantages:

  • Possible duplication of roles
  • Culture clash
  • Inefficiencies from lack of expertise

  
  

  Horizontal Integration Advantages:

  • Rapid market share increase
  • Cost reductions from bulk purchases
  • Reduced competition

  
  

  Horizontal Integration Disadvantages:

  • Possible unit cost increases
  • Culture clash
• What is a public limited company (PLC)?

  A company that sells shares to the public
• Why might a business transition to a PLC?

  To secure significant capital for expansion
• What is the process for becoming a PLC?

  Undergoing a stock market flotation
• What was the largest IPO as of March 2023?

  Saudi Aramco raised $29.4 billion
• What is one advantage of becoming a PLC?

  Access to significant capital quickly
• How does becoming a PLC affect risk for owners?

  Risks are spread among many shareholders
• What does increased liquidity mean for a PLC's shares?

  Shares can be bought and sold easily
• How does a board of directors benefit a PLC?

  Brings additional expertise and perspectives