paper 2

• organic growth is internal growth e.g new products, employ more staff, open more outlets, sell to more countries
• inorganic growth is external growth e.g mergers and takeovers
• organic growth advs

  • retain company culture
  • high productuon = economies of scale = lower avg costs
  • more influence with more market share
• organic disadvs

  • high risk
  • long period between investment and return on investment
  • growth limited depending on reliability of sales forecasts
• adv of PLC

  • limited liability
  • issue shares to raise capital for expansion
  • banks willing to lend money to large well established company as less risk
  • raise finance
• disadv of plc

  -loss of control of running business

  • expensive and lots of administrative work
  • prepare annual accounts
  • accounts available to general public
  • vulnerable to takeover
• If the business takes out a bank loan to fund expansion, they will have to pay back interest and it puts the business in immediate debt. cost of borrowing can be expensive. profitability of the expansion is affected due to increased costs
• Bank loan means the business owners don't lose control as they don't sell shares
• market conditions may change business aims and objectives - new competitors in the market or increased unemployment in the country affecting demand
• performance may change aims and objectives - good year = lots of profit = new decisions to expand / bad year = reduce staff
• legislation may change aims and objectives - response to new laws e.g minimum wage can cause slower growth
• IMporting goods from abroad benefits the business because raw materials are cheaper so spending less on variable costs so profits increase
• businesses may be able to access better machinery and technology if they import goods from abroad so they can keep ahead of competition, increase productivity and lower unit costs/ gain more mkt share/inc profit per unit
• factors contributing to globalisation

  • better tech e.g internet, communication, e-commerce
  • improved transport links (planes, cargo ships etc)
  • more MNC's operating across numerous countries
• barriers to trade

  • quota
  • tariff
  • subsidy
• Quotas - restrict amount of one product coming into country. Forces consumers to choose domestic options when imports run out. Restricted supply = increase prices = consumer less likely to buy from foreign import increasing demand for domestic businesses
• Tariffs - tax on imports makes the product more expensive so consumers are more likely to buy from domestic businesses.
• Subsidy - a grant of money that the business doesn't have to pay back - lowers cost of production and helps survival as they can compete with foreign competitors
• Trade Blocs - A group of countries that have agreed to reduce or eliminate tariffs and other barriers to trade. Freedom of movement of labour, capital and services and goods.
• Barriers to trade may not work as the UK is a rich country and has high consumer income so the population may buy the imports even at higher prices w/ tax
• The internet can be used to compete internationally - websites can be translated and several versions available so can sell to more countries. DElivery firms make sure goods arrive internationally and businesses don't have to invest in expensive shops - they can sell online
• A business may change their marketing mix to compete internationally. e.g adapting product to suit local taste, use corrcet promotions to encourage foreign customers to buy e.g ,multipacks
• a benefit to a business of exporting products is that they can increase market share to the large overseas markets so they increase their global sales and are internationally recognised which leads to more profit
• A drawback of a tariff is that it increases costs so they will either increase their prices or keep prices the same and see a fall in profit. Domestic competitors are cheaper - have to withdraw imports
• glocalisation - the process of a product or service being adapted to suit the local market
• adv of ethical behaviour - sales increase due to good publicity, improved reputation, employees retained easily as they agree with and like the way the business runs, usp
• disadv of ethical behaviour - costs increase and profits decrease, publicty may not be persuasive enough to attract customers, quality may not be as good
• Pressure groups can campaign against the business, consumers have new info on product and don't trust brand - sales and profits fall - business has to change its ways
• If prices are too high on essentials like petrol and train tickets , pressure groups may protest
• Bulk offer promotions are seen as waste encouragement and protests against adverts for addictive products
• A pressure group can damage brand image as they create bad publicity so customers are more likely to choose competitors so they have less sales
• An advantage of being recognised of having env responsibility is that they can attract more customers with a good reputation and USP - may charge premium price
• Fair Trade - ethical in the way they purchase goods and raw materials from developing countries. They pay higher prices so workers in developing countries can receive higher wages and experience better standard of living
• Limiations - product life cycle can be too simplistic as you can only see one product at a time. Lengths of stages vary depending on product and it can be hard to predict - cadbury has been in maturity stage for 100+ years but fidget spinners were a few months. DAnger of paralysis by analysis
• Stages of product life cycle - development, introduction (negative cashflow and promotion takes place), growth, maturity(saturation and profits), decline
• Price Skimming is where a business launches their product at a premium price - no competitors - overtime, competitors enter the market and price gets pushed down
• Penetration Pricing - A strategy where a firm sets a low price to gain market share and then increases the price as sales increase. Helps gain foothold in market and gain loyalty to inc price overtime. done in competitive markets
• Predatory Pricing - intentionally pricing low so other companies go out of business. Cannot be sustained in long term and you must be financially strong to survive this
• strong branding = loyalty = trust = competitive advantage = secures repeat sales = inc market share = use profits to expand further
• Job Production - high quality, expensive, specific, slow, single product at once, labour intensive, bespoke