Internal and external growth

• Why is business growth important?

  It may: Help to increase market share, improve profits, increase revenue and help a business open more branches.
• State 4 ways in which business growth can occur by:

  From employing more people

  From opening more branches

  From increasing sales or revenue

  From increasing profits
• Define Internal/Organic growth

  When a business decides to expand its activities by launching new products or entering new markets (Inside the business)
• Why do businesses want to grow internally?

  To increase their customers, revenues and profits
• State an advantage of a business having a market it already sells to

  It is easier and less risky to expand its product range with related products.
• What can a business do to ensure that business growth is successful?

  Engage in research and development directed towards innovation and improvement of products and processes.
• State a risk of a business entering new markets

  The business would have not dealt with these markets before, and entering the markets may be complex and expensive
• State three ways in which businesses can attempt to enter new markets:

  • Entering overseas markets
  • Amending it’s marketing mix
  • Taking advantage of technology
• State a benefit of a business entering a domestic market

  Can give the business access to enter a new market which could be extremely successful and increase profitability.
• Why is it important for a business to re examine its marketing mix when entering a new market?

  It’s important if a business wants to enter an overseas market as they might not know or understand the market
• State how a business could use technology to target new markets

  They may consider using e commerce to enable their customers to buy products even if their customers do not live near its store. New technology also means that Items are also cheaper to produce so they may be able to lower prices and target a lower income market
• State two advantages if a business growing internally

  A business can maintain its own values without interference from stakeholders

  Higher production means that the business can benefit from economies of scale and lower average costs.
• State two disadvantages of a business growing internally

  There may be a long period between investment and return in investment

  Growth may be limited and is dependent on the reliability of sales forecasts.
• State two ways in which a business can grow externally

  By using a merge or a takeover
• State ‘Merging’

  When two businesses join together and share their locations, stock marketing products and staff to allow them to grow together as a single business.
• Define ‘takeover’

  When a business decides to buy a percentage of a businesses shares in order to take control. It allows the business who buys shares to access growth through ownership of a new business in either the same or a different area of the market.
• State two advantages of a business growing externally

  Competition can be reduced

  Market share can be increased very quickly overnight
• State two disadvantages of a business growing externally

  It can be expensive to take over or merge with a business

  Managers may lack the experience to deal with other businesses
• State ‘Public limited company‘

  Where shares are sold to the public on the stock market.
• State 2 advantages of a business becoming a PLC

  The business has the ability to raise additional finance through share capital

  The shareholders have limited liability
• State two disadvantages of a business becoming a PLC

  It is expensive to set up and requires a minimum of £50000

  There is a greater risk of hostile takeover by a rival company