2.1 Growing the business

• What is organic growth in a business context?

  Growth through expanding its own activities
• How can a clothing brand achieve organic growth?

  By opening more stores and advertising
• What are the benefits of business growth?

  Increased market share and improved profits
• What is the formula for calculating revenue?

  Revenue = sales amount X price
• What does entering new markets involve?

  Expanding into overseas markets
• How can a business change its marketing mix?

  By targeting different market segments
• What is inorganic growth?

  Growth through mergers or takeovers
• What is a takeover?

  Buying more than half the shares of another firm
• What is a hostile takeover?

  When a company buys another against its will
• What are economies of scale?

  Cost advantages as production increases
• What is the difference between a merger and a takeover?

  A merger is a mutual agreement, a takeover is not
• How can a merger benefit a business?

  By pooling resources and skills together
• What are the disadvantages of merging?

  Clash of cultures and communication problems
• What is a public limited company (PLC)?

  A company that sells shares to the public
• What is the minimum share capital required for a PLC?

  At least £50,000 worth of shares
• What is flotation in the context of a PLC?

  Offering shares to the public for the first time
• What is a drawback of being a PLC?

  Exposure to takeovers if shares are bought
• What is retained profit?

  Profit kept within the business for growth
• How can selling assets provide finance for a business?

  By generating immediate cash from unused assets
• What is loan capital?

  Money borrowed from banks for specific purposes
• What is the role of financial institutions in business?

  Providing capital for business operations
• What is share capital?

  Money raised by selling shares in a company
• What happens when a company sells shares?

  It loses some control over the business
• What is a voting right in the context of shares?

  One vote per share owned by a shareholder
• What is the fixed interest rate mentioned for a loan?

  Four percent
• What is collateral in the context of a loan?

  It is an asset securing the loan
• What role do banks play for businesses?

  Providing capital
• What do shares represent in a company?

  Ownership of the company
• What happens to a business's control after selling shares?

  The business loses some control
• What do shareholders receive from a company?

  A dividend from profits
• What is a key factor that affects the amount of dividend payable?

  Profit levels
• Who cannot sell shares to raise money?

  Sole traders and partnerships
• What are the impacts of financing growth using loan capital?

  • Positive: Access to funds for expansion
  • Negative: Increased debt obligations
• What is the difference between an aim and an objective in business?

  An aim is a long-term vision and a objectives are are the steps a business needs to take to meet its overall aims.
• How do businesses evolve in terms of aims and objectives?

  They focus on survival or growth
• What is a common aim for new businesses?

  To survive in the market
• What can cause established businesses to refocus on survival?

  Low sales and increasing competition
• What is a common growth strategy for businesses?

  Entering new markets
• What might cause a business to exit a market?

  Shrinking market performance
• What is one reason businesses grow their workforce?

  To expand and create new teams