Business exam

• Research and development


  Work directed towards innovation, introduction, and improvement of products and processes
• Business growth is important as it enables businesses to increase the scale of their operation and competitiveness
• Internal growth

  Expanding from within by launching new products and/or entering new markets
• Many new businesses start out with one product idea and expand their product range with related products as they grow
• Ways business growth can occur

  • Employing more people
  • Opening more branches
  • Increasing sales or revenue
  • Increasing profits
• Internal growth

  • Expanding product range, increasing business units, adding new locations
• Internal business growth is successful when

  A business engages in research and development
• Research and development

  • Research into new products or processes, developing ideas
• Ways a business can attempt to enter new markets

  • Entering overseas markets
  • Amending its marketing mix
  • Taking advantage of technology
• Ways to achieve business growth

  • Internally (organically)
  • Externally (inorganically)
• Operating in other countries


  Could give the business access to a brand new market, which could prove extremely successful and increase profitability
• Taking advantage of new technology


  Businesses may also take advantage of new technology
• Operating in a domestic market


  The supply and demand of goods and services within a single country
• Entering new markets

  A business may decide to enter new markets to try to achieve growth. However, this comes with a higher risk than developing new products. There are three ways a business can attempt to enter new markets: entering overseas markets, amending its marketing mix, taking advantage of technology
• Business growth is important as it enables businesses to increase the scale of their operation and competitiveness
• Amending the marketing mix

  Whenever a business enters a new market, it is vital for it to re-examine its marketing mix. This is particularly important when a business is considering entering an overseas market, because the business might not know or understand the new market. For example, the price might need to be changed so that the product appeals to the new market. Alternatively, the new market might not know about the brand at all, in which case the marketing mix would need to be changed to encourage people to try it
• Changing the price of a product to appeal to a new market

  The price might need to be changed so that the product appeals to the new market
• Economies of scale

  Where the average costs (of production, distribution, and sales) fall as the business increases the amount of product that it produces, distributes, and sells
• Using e-commerce to target new markets

  Businesses may also take advantage of new technology to target new markets. For example, a business could use e-commerce to enable customers to buy products even if they do not live near its store
• Lowering prices due to cheaper production costs


  New technology may also mean items are cheaper to produce, so a business might be able to lower prices and target a lower-income market
• Disadvantage of internal growth: slower growth, long period between investment and return on investment, growth may be limited, and dependent on the reliability of sales forecasts
• Advantage of internal growth: low risk, maintaining own values without interference from stakeholders, benefiting from economies of scale, and lower average costs
• Stakeholder


  Those people who have a temporary connection with a business to carry out a particular role
• 1. commerce


  Any transaction that takes place through the internet
• Changing the marketing mix to encourage people to try a product

  The new market might not know about the brand at all, in which case the marketing mix would need to be changed to encourage people to try it
• Mergers

  Two businesses join to form a new (but larger) business
• Types of business growth

  • Internal (organic) growth
  • External (inorganic) growth
• Methods of merger or takeover

  • Horizontal integration
  • Forward vertical integration
  • Backward vertical integration
  • Conglomerate integration
• Business growth is important as it enables businesses to increase the scale of their operation and competitiveness
• Takeovers


  An existing business expands by buying more than half the shares of another business
• External growth (inorganic growth)

  1. Mergers

  2. Takeovers
• Advantages of being a PLC

  • The business has the ability to raise additional capital
• Ways to grow a business

  • Internally (organically)
  • Externally (inorganically)
• As a business grows, it may choose to become a public limited company (PLC)
• Advantages of external growth

  • Competition can be reduced
  • Market share can be increased very quickly overnight
• Business growth is important as it enables businesses to increase the scale of their operation and competitiveness
• External (inorganic) growth


  Advantages and disadvantages
• Public limited company (PLC)

  Shares are sold to the public on the stock market. Shareholders become part owners of the business and have a voice in how it operates. A CEO and board of directors manage and oversee the business’ activities. When a business sells shares on a stock market, this is known as ‘floating on the stock exchange’
• Disadvantages of external growth

  • It can be expensive to takeover/merge with another business
  • Managers may lack the experience to deal with the other businesses
• Hostile takeover

  A takeover of one company (called the ‘target company’) by another (called the ‘acquirer’) that is accomplished without the agreement of the target company’s management. Instead, the acquirer approaches the company’s shareholders directly or fights to replace the management to get the takeover approved