methods of business growth

• Methods of business growth and their impact:

  Internal organic growth:

  -organic growth-growing from within the business ,such as creating and launching successful new products.

  -organic growth can be funded by using the profits already generated and can happen at a steady pace ,without the risk of sudden, huge changes in size

  -there are two basic way to grow: new products & new markets:
• new products:

  • growth can be prompted by innovative product.
  • innovative-bringing a new idea to the market.
  • successful investment in research and development.
  • research and development-the scientific research and technical development needed to come up with successful new products.
• What does expanding overseas involve in terms of new markets?

  It involves selling products to foreign countries.
• How can companies grow revenues without inventing new products?

  By expanding into new international markets.
• What is a significant challenge when entering a new international market?

  Promoting an unknown brand in a market that needs to be understood.
• Why is understanding the local distribution system important in international marketing?

  It is part of the "place" element of the marketing mix and may differ radically in other countries.
• What is a challenge related to building a management team in a new country?

  Recruiting staff who understand the local market.
• How can companies change their marketing mix when entering a new market?

  • Adjust the target audience (e.g., target men as well as women for deodorants)
  • Modify product features to suit local preferences
  • Adapt pricing strategies to local economic conditions
  • Change promotional strategies to fit cultural norms
• How can technology be leveraged to promote products in new markets?

  By using social media for advertising and promotion.
• What is the benefit of adding e-commerce or m-commerce when entering a new market?

  It allows the market to be tackled more effectively.
• What are the key challenges and strategies for entering new international markets?

  Challenges:

  • Promoting an unknown brand
  • Understanding local distribution systems
  • Building a management team

  
  

  Strategies:

  • Adjusting the marketing mix
  • Utilizing technology for promotion
  • Incorporating e-commerce or m-commerce
• What is external (inorganic) growth?

  Growing by buying other businesses or merging with a business of roughly equal size.
• What is a takeover?

  One firm buys the shares of another firm.
• What percentage of shares must a takeover bidder own to have effective control?

  More than 50% of the shares.
• What is one benefit of a takeover as a method of growth?

  Substantial growth can be achieved "overnight".
• How does a combined business from a takeover affect negotiations?

  The combined business has more power in negotiations with suppliers and customers.
• What can be eliminated in a takeover to cut costs?

  Duplicated jobs and processes.
• What is a merger?

  A merger happens when two businesses of roughly equal size agree to come together to form one big business.
• What is a potential issue that can arise from a merger?

  Tensions between managers from the two previously separate businesses.
• What are the methods of financing growth for a business?

  • Carry out R&D and launch new products
  • Research and launch in new markets
  • Take over another business
  • Merge previously separate organizations
  • Split into two using internal or external sources
• What are internal sources of financing growth?

  Using money that is already in the business.
• What are external sources of financing growth?

  Attracting new money from external sources.
• The types of business ownership for growing businesses:

  ● public limited company(plc)

  meaning-a company with at least £50,000 of share capital that can advertise its share to outsiders and is therefore allowed to float its share on the stock market.

  • to raise capital they sell shares to friends and families
  • there is a limit to amount practically raised by friends and families
  • once a business becomes a pls then a business can "float" sell its shares to stock exchange ,to public this allows far more share capital
• flotation-describes the processes of listing company shares on the stock market, allowing anyone to buy the shares. Price can float freely up or down.
• share capital-money provided to a business by shareholders in return for a share in the ownership of the business.
• How does "going public" benefit a business in terms of contracts?

  It raises the profile of the business, making it easier to win big contracts from large companies.
• What are the advantages and disadvantages of becoming a public limited company (plc)?

  Advantages:

  • Sudden, possibly huge injection of share capital
  • Excellent source of capital for rapid expansion
  • Raises business profile for winning contracts

  
  

  Disadvantages:

  • Temptation for managers to be overly ambitious
  • Founder’s holding may fall below 50%, losing control
  • Increased scrutiny from shareholders and media
• What are the two main sources of finance for businesses?

  Internal sources and external sources
• What are the internal sources of finance for businesses?

  • Retained profit
  • Selling assets
• What is retained profit?

  Money left over from sales revenue after all expenses have been paid
• Who does the retained profit belong to?

  It belongs to the owners of the business
• How can retained profits be used by a business?

  As working capital or reinvested into the business
• Why is retained profit considered the safest source of finance for business growth?

  Because it does not involve borrowing or repayment obligations
• What does selling assets involve?

  Raising cash by selling parts of a larger business
• What is a potential drawback of selling assets to finance growth?

  It may be expensive
• What are the external sources of finance mentioned?

  Loan capital and share capital
• What is loan capital?

  Borrowing from banks that requires paying interest rates
• What is share capital?

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

  It is a method for public limited companies to raise share capital
• How do internal sources of finance differ from external sources?

  Internal sources do not involve debt, while external sources often require repayment