business theme 2

• Internal growth


  • Targeting new markets
  • Developing new products
• Internal growth


  • Slow
  • Low risk
• External growth


  • Merger
  • Takeover
• External growth


  • Risky
  • Faster
• Over half of mergers and takeovers are unsuccessful
• Economies of scale


  • When large firms can make more profit
  • When large firms can charge less for their products
• Diseconomies of scale


  Areas where growth leads to increase in average unit cost
• Sources of finance


  • Internal (Retained profit and fixed assets)
  • External (Loan capital and share capital)
• PLC


  • Company that can sell shares on stock market
  • More capital can be raised
  • Limited liability
  • Hard to get lots of shareholders to agree to decisions
• why do Business aims and objectives change

  • If they had to survive or grow
  • If size of workforce has changed
  • Entering or leaving new markets
  • Changed size of product range
• Why business aims and objectives change

  • New legislation
  • Changes in market conditions
  • Changes in technology
  • Internal changes
  • Performance
• Globalisation


  The process by which businesses and countries become more connected (imports + exports)
• Impacts of globalisation on businesses

  • Imports, able to buy supplies cheaper, reduces costs + increases profit
  • Competition: more competition
  • Exports: larger markets to sell to
  • Business location, able to build factories abroad (cheap labour)
  • Multinationals: Single businesses operating in more than 1 country
• Barriers to international trade

  • Tariffs: taxes on goods exported + imported
  • Trade blocs: group of countries that have no taxes when trading
• Ways to stand out from international competition

  • Use e-commerce (cuts cost, still competitive)
  • Changing marketing mix based on countries' culture
• Advantages to a business behaving ethically

  • Business can advertise how it acts which might gain customers that think being ethical is more important than price
  • Treating staff ethically increases motivation and productivity
• Disadvantages to a business behaving ethically

  • Can be costly (higher labour costs)
  • Ethically sourced materials more difficult to find + expensive
  • Increased costs harder to make a profit
• Other ways a business can be sustainable

  • Use less packaging + recycle
  • Dispose of hazardous waste carefully
  • Use efficient machinery that is less polluting
  • Use more renewable energy
• Pros of being sustainable

  As consumers become more aware of environmental issues, they are now buying more sustainable (wind or solar power) products
• Cons of being sustainable

  Buying new equipment and developing new processes in order to be more sustainable environmentally friendly products can be very expensive
• Pressure groups


  Organisations that try to influence decisions made by businesses, if a pressure group was a campaign against a certain business highlighting areas where they could be more ethical this will give them a bad reputation and lose customers
• Marketing mix


  Can use different elements to make business decisions, they all affect each other
• Ways to differentiate a product

  • USP (fast delivery etc)
  • Promotion to make it seem different
  • Price (more expensive can make it seem luxury to niche market)
• Product life cycle


  1. Introduction

  2. Growth

  3. Maturity

  4. Decline
• Extension strategies


  • Adding more / different features
  • Using new packaging
  • Targeting new markets
  • Changing advertisement
  • Lowering price
• Factors influencing price (internal)

  • Technology: if machinery was expensive product price needs to be higher
  • Production method: if job production the price is set higher
• Factors influencing price (external)

  • Competition: just below or above competitors
  • Market segments: if targeted to high income customers price will be high
  • Product life cycle: when in introduction very high, in growth very low
• Factors influencing price (cost of raw materials)


  Business will want to cover these costs
• Pricing strategies


  • Price penetration: starts low to get people to try then price goes up
  • Loss leader pricing: price is set below cost + they make profit on other products
  • Price skimming: charges high price at first then lowers it
  • Competitive pricing: just below competitors
  • Cost-plus pricing
• Ethical considerations


  • Moral principles
  • Treating employees well (fair wages)
• Benefits of behaving ethically

  • Increase good reputation
  • Increase sales
  • Charge a higher price as ethical is seen as a USP
  • Builds customer loyalty
• Pressure groups


  • Organised group of people that seek to influence government policy, legislation and business behaviour
  • If a business acts in a way they disagree with they may go to the media leading to boycotting + damaged profit
• Fair trade

  Social movement to help producers in EDCs and LIDCs achieve better trading conditions + to promote sustainability
• Design mix


  • Aesthetics
  • Cost
  • Function
  • Quality needs to match price
  • Differentiates
• Product life cycle


  1. Development

  2. Introduction

  3. Growth

  4. Maturity

  5. Decline
• Extension strategies


  • Adding more features to product
  • Using new packaging
  • Targeting new markets
  • Lowering prices
  • Changing advertisement
• Factors affecting price


  • Internal: technology
  • External: competition
• Pricing strategies


  • Price skimming: charges high price at first then lowers price
  • Price penetration: charge lowest price but then increases
  • Competitive pricing: charging similar prices to competition
  • Cost-plus pricing
• Methods of promotion


  • Advertisement: newspapers, magazines, sponsorship, TV ads, leaflets, flyers, business cards, internet adverts
  • Sales promotion: special offers, product trials
  • Social media: adverts on social media, mailing lists
• Place (methods of distribution)

  • Retailers to consumers from a shop
  • E-tailers selling products online