GCSE business

• internal (organic growth):

  • launching new products
  • opening new outlets
  • expanding overseas
  • entering new markets
  • increased production capacity
• Advantages of organic growth:

  • less risk
  • can be financed internally
  • growth can be steady
  • builds on existing strengths of a business
• disadvantages of organic growth:

  • slow
  • may be limited to market size
  • may be difficult to build market share if the business is already the market leader
• external (inorganic) growth:

  • mergers
  • takeovers
• advantages of inorganic growth:

  • faster
  • reduced competition, increased market share and power
  • risk is diluted if products are different to core products of the business
• disadvantages of inorganic growth:

  • risky
  • expensive
  • culture clash
  • complications with management
• A public limited company (Plc) is a company which sells shares on the stock market to raise capital.
• Advantages of Plc:

  • limited liability
  • able to raise large amounts of finance through shares
  • media is actively interested in Plc activity
  • may be viewed as prestigious which can improve reputation
• Disadvantages of Plc:

  • not much privacy
  • vulnerable to takeover
  • can face scrutiny from media
  • expensive and time consuming to set up
  • distributing dividends lowers the amount available for reinvestment
• Internal sources of finance:

  • retained profit - limited amount, no interest
  • selling assets - no dilution of ownership, not sustainable as finance is raised on a one off basis
  • personal savings - limited amount, no interest
• External sources of finance:

  • loan capital - can raise large amounts of finance, interest
  • share capital - dilution of ownership, no interest or repayments
• Why aims and objectives change as businesses evolve:

  • market conditions - new competitors, changes in interest rates
  • technology - must adapt to new changes in order to keep up with competitors
  • performance - if a business is doing poorly, their aim may be to survive
  • legislation - impacts business activity and decisions as they must conform to laws
  • internal reasons - change in management team
• How aims and objectives change:

  • focus on survival or growth
  • enter or exit markets
  • growing or reducing workforce
  • increasing or decreasing product range
• Globalisation is the process of the world's economies become increasingly interconnected.
• Positives of globalisation:

  • cheap labour
  • wider markets and customer base
  • encourages innovation and efficiency as competition increases
• Negatives of globalisation:

  • increased competition
  • fluctuating exchange rates and global economy
  • increased threat of takeovers
  • tariffs
• A tariff is a tax on imports, which is a tax on foreign goods. A trade bloc is a group of countries that have agreed to restrict trade with other countries.
• SPICED (Strong Pound Imports Cheap Exports Dear)
• WPIDEC (Weak Pound Imports Dear Exports Cheap)
• Business compete internationally by:

  • internet and e-commerce - can communicate with customers, no need for warehouse, reduced costs, can help create awareness of the business
  • changing marketing mix - product and price may need to be modified to meet international customer needs, promotional activity may need to be increased, place may need to be reconsidered (road and distribution methods differ around the world)
• Ethical considerations:

  • paying the national living wage instead of minimum wage
  • having an open and honest relationship with suppliers, and paying them fairly
  • listening to concerns of local community about noise or air pollution
  • making voluntary financial support
• Environmental considerations:

  • employees could work from home to reduce traffic congestion
  • recycling within the business
  • investing in green equipment
• Benefits of ethical behavior:

  • improve reputation
  • easier to recruit new staff
  • can enable a business to differentiate itself
  • staff retention increases
• Drawbacks of ethical behaviour:

  • costs may increase
  • difficult to source ethical suppliers
  • business must follow through with ethical promises, or will get negative publicity
• The design mix:

  • function - how well the product carries out its purpose
  • aesthetics - the physical appeal of the product
  • cost - the cost of designing the product to decide on a price
• The product life cycle:

  • introduction - the product is first launched into the market
  • growth - sales increase at their fastest rate
  • maturity - most profitable stage where sales peak
  • decline - sales decrease
• Extension strategies refer to strategies used to reverse the decline phase of a product.
• Extension strategies:

  • update packaging
  • change target market
  • add different features
  • advertising
  • price reduction
• The importance of product differentiation:

  • USP - allows the business to stand out
  • brand loyalty
• Pricing strategies:

  • price skimming - start at a high price then decrease over time
  • price penetration - start at a low price to gain market share and increase over time
  • competitive pricing - basing price off competitor's prices
  • cost plus pricing - basing price of the cost of making the product to guarantee profit
• Influences on pricing strategies:

  • technology
  • competition
  • market segments
  • product life cycle
• Promotion strategies:

  • advertising - can reach large audience, can be expensive
  • sponsorship - builds brand awareness, person being sponsored may reflect the firm badly
  • product trials - can gain feedback, time consuming
  • special offers - increase sales, may damage brand image
• Targeted advertising online:

  • reaching the correct target market
  • personalised promotion
  • lower costs
  • re-engage with potential customers
• Benefits of advertising via social media:

  • large customer base
  • quick and simple
  • cheap
  • accessible
• Drawbacks of advertising via social media:

  • negative comments may arise
  • experience and time is needed to manage accounts effectively
  • messages can be easily ignored
• E newsletters advantages:

  • cheap to distribute
  • can result in more website visits
  • can engage with customers
• E newsletters disadvantages:

  • spam filters may put E-newsletter into a junk folder
  • can be easily ignored
  • time and effort must be put into making an effective E-newsletter
• Methods of distribution:

  • Producer - wholesaler - retailer - consumer
  • Producer - retailer - consumer
  • Producer - consumer
• Benefits of wholesalers:

  • reduces transport costs for manufacturers as wholesalers by in bulk
  • wholesaler takes on risk and cost of storing stock
• Drawbacks of wholesaler:

  • manufacturer will lose some profit to wholesaler
  • manufacturer loses control over how product is sold and marketed