Business paper 2

• what are methods of business growth?

  internal growth and external growth
• what are methods of internal growth in a business?

  -developing new products

  -targeting new markets
• what are methods of external growth?

  merger, takeover
• what are mergers?


  the combining of companies
• which is riskier and faster? internal growth or external growth?

  External growth is faster but riskier, internal growth is slower but less riskier
• what are the four ways a company can merge or takeover another firm?

  -join with a supplier

  -join with a competitor

  -join with a customer

  -join with an unrelated firm
• why might owners change their business to a PLC?

  as "public" means that shares in the company are traded on a stock market and can be bought and sold by anyone, bringing extra finance into business, especially if shares are high in demand so will increase in value
• Advantages of a public limited company

  -more capital can be raised by a PLC than any other kind of business which helps business to expand and diversify

  -PLCs are incorporated and have limited liability so owners only lose the amount of money they invested
• disadvantages of Public Limited Companies

  -each shareholder has little to say on how business is run

  -someone can buy enough shares to take over the company

  -accounts have to be made public

  -PLCs have many shareholders who all want a profit
• what are internal sources of finance?


  retained profit and fixed assets
• what are retained profits

  profits that owners have decided to leave to invest back into the business after they've paid themselves a percentage
• how can a company's aims and objectives change?

  -focus on survival or growth

  -grow or reduce of its workforce

  -enter or exit new markets

  -increase/decrease size of its product range
• what are some external reasons causing businesses to change their aims and objectives?

  -new legislations means company's may need to adjust their aims+objectives

  -change in market conditions, if the market grows company might change aims+objectives to focus on growing sales

  -change in technology, may change aims+objectives to be up to date with technology
• what are some internal reasons causing businesses to change their aims and objectives?

  -performance, if a company performs better or worse than expected, aims+objectives can be changed

  -internal changes, such as management changes may cause a business's aim+objective to change
• what is globalisation?


  Globalisation is the process by which the world is becoming more connected which means it's easier for b
• why is globalisation good?

  which means it's easier for businesses to import products and export products
• what is exporting?


  selling products to other countries
• what can globalisation affect in a business?

  -imports, means there's a larger market so more competitive

  -exports, easier to sell goods abroad so more profit due to increased sales

  -business location, makes it easier for businesses to locate parts of their business abroad

  -multinationals, businesses who operate in more than one country enter a new country, meaning they may need to change the way they operate
• what are some barriers to international trade?

  tariffs

  trade blocs
• impacts of trade blocs?

  -countries outside the trade blocs will find it hard to compete with those inside as they're priced will be affected by paying tariffs
• how can businesses compete internationally?


  -Use of the internet and e-commerce

  -Changing the marketing mix
• impacts of accessing a global market?

  -more competition

  *however a larger customer base so increased sales and profit
• use of e commerce and internet globally?

  businesses can compete without having to set up stores and infrastructure in foreign countries
• what is the impact of environmental considerations on business

  -aiming to be more sustainable, such as:

  -using less packaging and recycle more so less waste goes to landfill

  -use more efficient machinery, polluting less to the air

  -use more renewable energy sources
• pros of being environmentally friendly

  -as people become more aware of environmental issues, customers are starting to prefer eco friendly products

  -taking environmental issues gives firms a competitive advantage, attracting new customers and sales
• cons of being environmentally friendly

  -expensive for the business as they may need to buy more equipment or materials, producing a negative effect on profit
• why might a business change its policies due to pressure groups?

  -if pressure groups hold campaigns against firms or industries, it could affect business reputation, reducing sales and customers

  -in order to improve their reputation, businesses may change their marketing mix (e.g. due to palestine, people boycott disney, causing disney to lower the prices in order to gain customers)
• what is the design mix?


  -Function(design must be fit for its purpose)

  -Aesthetics(a good product looks attractive)

  -Cost(a good design leads to low manufacturing costs)
• what is the product life cycle?

  research and development, introduction, growth, maturity, decline

  
• how do the different parts of marketing mix affect each other?

  the method of distribution of a product is affected by pricing and promotion

  the quality and price of product may affect how it's promoted
• what are ways you can differentiate or products?

  giving it a USP

  promoting product in a different way

  change the price of its product so more are sold
• explain the introduction of the product life cycle?

  launching the product for sale for first time, place is important, no point selling where no one is interested in buying it
• explain the growth of the product life cycle?

  demand increases, until product becomes established
• explain the maturity of the product life cycle?

  demand reaches its peak, promotion becomes less important as popularity grows
• what are extension strategies?

  methods to help extend the life cycle of a product so businesses can profit from the product for longer
• disadvantages of extension strategies

  spending more money on the business, takes away cash from other parts of business
• methods of extension strategies

  -adding more or different features

  -using new packaging

  -targeting nee markets

  -changing advertisements

  -lowering price
• what are 5 pricing strategies?

  - price penetration

  - loss leader pricing

  - price skimming

  - competitive pricing

  - cost-plus pricing
• what is price penetration? name advantages and disadvantages

  it's when a firm charges very low prices when a product is new so many people try it

  *good way to establish a market share in a competitive market

  *at first makes very little profit but can increase the price as you go on for increased profits
• what is loss leader pricing? name advantages and disadvantages

  it's when the price of a product is set below the cost and customers will buy other products with it

  -doesn't make a profit if customers don't buy the other products

  (e.g PS4 and the controllers)