Topic 2.1 Growing the Business & Environmental Influences

Flashcards covering business growth strategies, sources of finance, globalization, and environmental and ethical influences on businesses.

Internal Growth

When a business grows by expanding its own activities, often reliable and inexpensive but slow.

External Growth

Involves a merger or takeover, where two firms join together or an existing firm buys another by purchasing its shares.

Merger

Two firms join together to form a new firm.

Takeover

An existing firm takes over another by buying its shares.

Economies of Scale

When a firm expands, its output increases, and costs increase slower than output, leading to a cheaper average unit cost.

Diseconomies of Scale

Areas which lead to increases in average unit costs, such as larger firms being harder and more expensive to manage or communicate within.

Retained Profits

An internal source of finance where profit after large dividend payments is reinvested into the business.

Fixed Assets

An internal source of finance obtained by selling physical assets of the business.

Loan Capital

An external source of finance where money is lent to the business and repaid with interest, often requiring security from banks.

Share Capital

An external source of finance obtained from selling shares of the business, where investors become part-owners but there are no repayments.

Public Limited Company (PLC)

A type of company that can sell shares on the stock market, allowing anyone to buy and sell them.

Limited Liability

A legal structure where the personal assets of shareholders are protected from business debts.

Globalisation

The process by which businesses and countries around the world become more connected, making import and export easier.

Multinationals

Single businesses operating in more than one country.

Tariffs

High taxes on goods being exported or imported, acting as a barrier to international trade.

Trade Blocs

Groups of countries that have few or no trade barriers between them.

Ethical Considerations

Moral principles of right and wrong that influence business practices, such as employee treatment, supplier relationships, and product development.

Fairtrade

A certification that ensures producers in developing countries receive fair prices for their products.

Sustainability

Working in ways that won't damage the Earth for future generations, often involving reducing waste, using renewable energy, and efficient machinery.

Pressure Groups

Organizations that try to influence businesses and governments to change their policies, often impacting a business's public image and sales.