EDEXCEL BUSINESS-T2-Growing a Business

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

what is an objective?

an aim or goal for the business

why might a business change its response to marketing conditions?

there may be increased unemployment which affects the demand for the businesses goods or services

why might a business change its aims in response to technology?

keeping up with innovations

why might a business change its aims in response to its performance?

if a business has a good year in terms of sales and profit, it may expand or take on more staff

why might a business change its aims in response to legalisation?

the UK Minimum Wage Law means a business has to change its aims, as growth may be slower because they have to pay higher wages each year

why might a business change its aims in response to internal reasons?

if the business expands, it may want to have objectives of increased revenue which could be a personal goal for the owner

what is survival?

when a business aims for make a profit in its first year of trading