2.1 Business Growth

first topic of paper 2

What’s internal finance?

internal - the business finds the money itself

—> this could be through selling personal assets, retained profit or personal savings

What’s external finance?

business may ask for a loan to expand business (Overdraft)

ways to raise money could also be through

• dividends

• share capital

• trade credit

What’s ‘organic/internal growth’?

Expanding the business by its own operations

This could be by:

→ Opening new stores - allows to be closer to customers in another location

→ New product development - expand customer base

disadvantages

→ Long period between investment & return of investment

→ growth is limited & dependent on reliability of sales forecast

What’s inorganic/external growth?

a business trying to grow itself quickly

→ it’ll decide to merge or takeover another business

merge - two businesses join to form one

takeover - takeover by buying 50% + of shares

advantages

→ reduces competition and speeds growth

disadvantages

—> clashes of work cultures

What’s retained profit?

profits earned from the business

advantages

→ no need to pay back interest

disadvantage

→ you’re using your own profits lol

What’s globalization? (in business)

people, businesses & governments around the world becoming more interconnected

→ this means reduced costs but more competition

What is ethics in business?

Understanding of morals of right & wrong

→ eg. Paying workers fair wage, not polluting the environment

what are the benefits to behaving ethically in business?

→ easier to recruit staff due to good reputation

→ increased employee motivation

→ higher revenue - customers making purchases due to their morals

What are the drawbacks to behaving ethically?

→ higher costs

→ Possibility of building up false expectations amongst consumers

→ Bad publicity if business is found to be behaving unethically

What are fairtrade products?

Ethically sourced materials for a fair price

What are pressure groups?

organizations set up to try influence what consumers think about the business & its impact on the environment

Eg. protesting