Business 2

• Methods of business growth

  1. Internal (organic) growth

  2. External (inorganic) growth
• Internal (organic) growth


  A business grows through its own operations and expansion
• Internal growth methods


  • Launching new products
  • Making new inventions
  • Improving existing products
  • Expanding locations
• External (inorganic) growth


  A business grows through a merger or takeover with another business
• Mergers involve two businesses combining to form a new business, while takeovers involve one business buying another
• Internal growth


  • More control but slower
  • External growth is quicker but more expensive
• Example of external growth


  • Facebook buying Instagram for $1 billion in 2011/2012
• Internal sources of finance

  • Owner's funds
  • Retained profits
  • Sale of assets
• External sources of finance

  • Share capital (private or public limited company)
  • Loan capital (overdraft or bank loan)
• Overdraft


  A short-term source of finance where a business can go into a negative bank balance for a period of time
• Aims


  The long-term goals of a business
• Objectives


  The targets that help a business achieve its aims
• Factors that can cause aims and objectives to change

  • Market conditions
  • Technology
  • Business performance
  • Legislation
  • Internal reasons (new leadership)
• How aims and objectives change as a business grows

  1. Survival focus initially

  2. Shift to growth focus over time

  3. Decisions on entering/exiting markets

  4. Workforce growth or reduction
• Businesses may exit markets that are not performing well, especially if technology has made the market no longer viable
• Responding to market changes

  1. Growing workforce

  2. Reducing workforce
• Decisions to grow or reduce the workforce depend on whether the business is responding to positive or negative factors
• Imports


  Bringing something in from abroad
• Exports


  Selling to abroad
• Strong pound


  Imports cheaper, exports dearer
• Multinational company


  A company that operates in different locations
• Businesses may change locations to take advantage of favourable conditions in other countries
• Businesses can compete globally even from one location through e-commerce
• Businesses may need to adapt their marketing mix when entering new countries
• Tariff


  A tax on imports
• Quota


  A limit on imports
• Trade block


  An organisation of countries with regional free trade
• Ethics


  Doing the right thing
• Examples of ethical practices

  • Fair treatment of stakeholders
  • Positive impact on community
  • Using ethical suppliers
• Sustainability


  Using renewable resources
• Environmental issues


  • Deforestation
  • Plastic waste
  • Emissions and pollution
• There is often a trade-off between ethics and profit for businesses
• Pressure group


  An organisation that encourages and pressures change from businesses or government
• Pressure groups can impact a business's brand reputation if they criticise the business's ethical practices
• Market mix topics


  1. Product

  2. Price

  3. Promotion

  4. Place
• Design mix


  • Priorities a business has when designing a product or service: Aesthetics, Function, Economic/Manufacturing cost
• Product life cycle


  Stages a product goes through over time: Introduction, Growth, Maturity, Decline
• Product reaches decline phase

  Business may implement an extension strategy to extend the product's life
• Technology products often have short life cycles due to rapid innovation
• Differentiation


  Creating a way to make a product stand out from the competition