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why would a small business want to expand?
to make more profit, get a bigger customer base, go international
what is organic growth?
the business has grown from within
what are examples of organic growth?
innovation, technology, expanding overseas
what are disadvantages for organic growth?
very high-risk, growth may be slower and limited, long period between investment and return on investment
what is an advantage for organic growth?
retain their own company culture, cheaper than a merger, business can benefit from lower average costs
what is inorganic growth?
when a business has grown by a merger or a takeover
what is a merger?
when 2 business come together to become a new one
what is a takeover?
when one business takes control over another business
what is a disadvantage of mergers?
businesses have different cultures so they may not work as well together, communication problems, unreliable merger partners
what is an advantage of mergers?
better deals because of increased order sizes, increased revenue and market shares, companies can just buy the products they need
what are the 2 things a takeover can be?
friendly or hostile
what is a disadvantage of takeovers?
very expensive, additional legal costs, outside investment, leasing to loss of control for the owners
what is an advantage of takeovers?
buying a competitor eliminates the threat of that competitor, increases market share, less expensive to buy than to open a new site
what is a public limited company?
a company listed on the stock exchange meaning anyone can buy shares into the business
what is a disadvantage of public limited companies?
expensive to produce accounts every year, have to publish annual accounts meaning everyone can see their financial information, expensive process to become a PLC
what is an advantage of public limited companies?
easy to grow and expand, easy to raise capital, banks are willing to lend money to a well-established company
what are the 2 types of finance for growth?
internal and external
what is internal finance?
the business finds the money
what is external finance?
the business borrows the money
what are examples of internal finance?
retained profit, sales of assets
what are examples of external finance?
loans, share capital
what is floating on the stock market?
when a business decides it needs more money to expand
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