Business Growth

• Advantages of Business Growth

  • increase market share
  • increased profit meaning break even faster
• Methods of Internal Growth

  • New markets
  • New Products
  • New Technology
• New Markets


  Changing the marketing mix to find new markets or expanding overseas
• New Products

  • Adapting an existing product or service
  • researching or developing new products not currently available
• New Technology


  Large organisations can benefit from investing in the latest technology or in the ability to develop the technology themselves
• External growth


  Faster way to grow by joining with another business
• Methods of external growth

  • merger
  • Takeover
• Merger 


  when two or more businesses voluntarily agree to join up and work as one together.
• Takeover


  When one business busy another. To take over it is necessary to gain control by owning enough shares.
• One reason why a business might want to grow

  Higher Profit
• Internal Growth 


  When a business expands by itself, by bringing out new products or entering new markets.
• How do PLC's raise capital?

  selling shares on a stock exchange. This makes it easier for businesses to raise money for growth.
• Benefits of PLC's

  • ability to raise finance through share capital
  • Limited liability
  • More reliable
  • able to negotiate better prices with supppliers
  • Greater public awareness
• Disadvantages of PLC's

  • more complex accounting and reporting procedures
  • Risk of potential takeovers
  • Increased public and media attention
  • Less privacy around financial performance
  • Greater influence on decision-making by external shareholders
• Becoming a PLC may enable a business to grow in a multinational and operate in more than one country.
• A private limited company (ltd) can change into a public limited company (plc) through a stock market flotation.
• Stock Market Flotation


  where a business issues shares for sale on the stock exchange
• Financing Growth


  A business can use internal sources of finance or external sources
• Internal sources of finance

  • Sales of assets- selling is a fast way to raise capital
  • Retained profits - safest as involves no risk or debt, profit is not guaranteed and may require investments.
• External sources of finance

  • Loan capital- long term bank loan against assets, interest will be charged
  • Share Capital- can raise capital by selling shares, puts at risk of takeover, shareholders entitled to share of profits through dividends
• The economic climate may change the level of demand and spending in the market. A fall or rise will influence business objectives.
• Trade off


  when something is given up in order to gain or achieve something else.
• PLC


  Public Limited Company- a business that sells its shares on the stock exchange.
• Retained Profit 


  Profit left after the business has paid dividends and taxation
• Loan Capital 


  Finance received from a bank when taking out a loan.
• Share Capital


  The money invested into a business by shareholders.
• Innovation


  Adapting existing products to developed and improved versions.