Growing the business

What is internal (organic) growth?

When a business grows by expanding its own activities, such as selling more output, launching new products, or entering new markets

Why is business growth an important objective?

It can increase market share, improve profits, increase revenue, and allow more branches to open

What are some ways a business can achieve growth?

By employing more people, opening more branches, increasing sales, or increasing profits

How can a business achieve organic growth?

By expanding its product range, opening new locations, or increasing the number of business units

Why do businesses develop new products?

To expand their product range, attract more customers, and increase revenue and profits

What is research and development (R&D)?

Work aimed at innovating, introducing, and improving products and processes

What is entering a new market?

When a business begins selling its products in a market it has not operated in before to achieve growth

Why is entering a new market risky?

Because the business is unfamiliar with the market and entry can be complex and expensive

What are three ways a business can enter a new market?

Entering overseas markets, amending its marketing mix, and using new technology

What is entering an overseas market?

When a business begins trading in other countries to access new customers and increase profitability

Why is entering an overseas market challenging?

Because it involves high costs and dealing with unfamiliar markets

What does amending the marketing mix involve?

Adjusting product, price, place, or promotion to suit a new market

Why is amending the marketing mix important in overseas markets?

Because customer needs, awareness, and price expectations may be different

How can technology help a business enter new markets?

Through e-commerce to reach distant customers and by reducing production costs to target lower-income markets

What is an advantage of internal (organic) growth?

It is low risk, allows the business to keep its values, and can lead to economies of scale with lower average costs

What is a disadvantage of internal (organic) growth?

It is slower, with a long wait for return on investment and limited growth dependent on sales forecasts

What is external (inorganic) growth?

Business expansion through mergers or takeovers

What is a merger?

When two businesses join to form a larger new business

What is a takeover?

When one business buys over half the shares of another business to gain control

What is horizontal integration?

When two competitors in the same market merge or one takes over the other to increase market share

What is forward vertical integration?

When a business takes over or merges with another at a later stage in the supply chain

What is backward vertical integration?

When a business takes over or merges with another at an earlier stage in the supply chain

What is conglomerate integration?

When two businesses in unrelated markets merge or one takes over the other to spread risk

What is an advantage of external (inorganic) growth?

It can quickly increase market share and reduce competition

What is a disadvantage of external (inorganic) growth?

It is expensive and managers may lack experience with the new business

What is a public limited company (PLC)?

A business where shares are sold to the public on the stock market, and shareholders own part of the business

What is floating on the stock exchange?

When a business sells its shares to the public on the stock market

What are advantages of being a PLC?

Ability to raise finance through shares, limited liability for shareholders, and better supplier negotiations due to economies of scale

What are disadvantages of being a PLC?

High setup costs, complex reporting requirements, and higher risk of hostile takeovers

What is an internal source of finance?

Capital raised from within the business

What is an external source of finance?

Capital raised from outside the business

What is an internal source of finance?

Capital raised from within the business

What is retained profit?

Profit kept in the business for reinvestment instead of being paid as dividends

What are advantages of using retained profit?

It is cheap, quick, and convenient with easy access

What are disadvantages of using retained profit?

Once used, it is gone and cannot cover future unforeseen problems

What is selling assets as a source of finance?

Raising money by selling unwanted items like machinery or equipment

What are advantages of selling assets?

It is convenient, can create space, and can provide quick cash

What are disadvantages of selling assets?

They may sell below market value or may be needed again in the future

What is using the owner’s savings as finance?

When a business owner invests personal savings into the business

What are advantages of using owner’s savings?

It is cheap, quick, and convenient

What are disadvantages of using owner’s savings?

The owner may not have enough savings or may need the cash personally

What is an external source of finance?

Capital raised from outside the business

What is loan capital?

A lump sum borrowed from a bank and repaid in instalments with interest

What are advantages of loan capital?

It allows regular repayments over time and provides a lump sum

What are disadvantages of loan capital?

Approval can be slow, interest makes it expensive, and collateral may be required

What is share capital?

Money raised by selling shares to selected people in a private limited company

What are advantages of share capital?

No repayment or interest, and the business can choose shareholders

What are disadvantages of share capital?

Profits are paid as dividends and control is diluted

What is stock market flotation?

When a business becomes a PLC and sells shares to the public

What are advantages of stock market flotation?

It can raise large amounts, requires no repayment or interest, and increases recognition

What are disadvantages of stock market flotation?

It is costly and complex, risks losing control, profits are shared, and records become public

What is a business aim?

An overall long-term goal for the business

What is a business objective?

A specific step or target needed to achieve a business aim

Why do business aims and objectives change?

Because market conditions, competition, and technology evolve

How do market conditions influence business objectives?

Growing markets encourage growth aims, while rising competition may shift focus to survival

How can technology change business aims and objectives?

It encourages innovation, new payment methods, and improved manufacturing processes

What is an example of technology changing business aims?

Car manufacturers focusing on electric vehicles instead of petrol or diesel cars

What is a business aim in response to performance?

A goal created to improve areas like sales, revenue, profit, marketing impact, or productivity

How might poor financial performance affect business aims?

It may lead to aims focused on improving sales, revenue, or profit in the next year

Why might a profitable business still change its aims?

Even successful businesses aim to grow and improve continuously

How does legislation affect business aims and objectives?

New laws like health, safety, equality, or wage regulations require businesses to adjust their operations and goals

What is an example of legislation that affects business aims?

The National Minimum Wage Regulations 2016, which can increase costs and change financial goals

What are internal reasons for changing aims and objectives?

Strategic decisions like entering new markets or launching new products or services

What does focusing on survival mean for a business?

Aiming to maintain day-to-day operations during threats like competition or poor sales

Which businesses typically focus on survival?

New businesses in their first year or established businesses under threat from competition

When does a business focus on growth?

When it has secured its market position and aims to expand sales, products, or markets

Why might a business exit a market?

Shrinking markets, poor product performance, new market opportunities, or overall business failure

What is an example of a UK business exiting a market?

Morrisons left the convenience store market to focus on larger supermarkets

Why do businesses grow or reduce their workforce?

Growth requires more staff, while survival strategies or automation may require staff reductions

What is an example of workforce reduction during growth?

Banks closing branches due to online banking and automated cash machines

Why do businesses increase their product range?

To compete, reach new customers, and reduce risk by relying on multiple revenue sources

Why do businesses decrease their product range?

To focus on profitable products or prepare for a new range in another sector

What is globalisation in business?

When companies operate internationally, buying, producing, and selling goods and services globally

What are the three main elements of globalisation?

Imports, exports, and business location

What is importing?

Buying goods or services from overseas and bringing them into a country

Why are some products imported?

Due to climate, limited raw materials, or lower production costs abroad

What is exporting?

Selling goods or services from one country to overseas markets for revenue

What does SPICED stand for?

Strong Pound Imports Cheaper Exports Dearer

What does WPIDEC stand for?

Weak Pound Imports Dearer Exports Cheaper

How does a strong pound affect imports and exports?

Imports are cheaper, but exports are more expensive and may reduce sales or profit margins

How does a weak pound affect imports and exports?

Imports are more expensive, but exports are cheaper and may increase sales or profit

What are advantages of operating overseas as a business grows?

Access to more customers, higher sales and profit potential, larger product range, and increased brand awareness

What are disadvantages of operating overseas?

Increased responsibility, higher risk, and greater chance of failure

What is a multinational company (MNC)?

A business that operates in multiple countries around the world

What is another term for a multinational company?

Transnational corporation (TNC)

What is glocalisation?

When a business adapts products to suit local markets while maintaining a global brand image

What is a tariff?

A tax on imported goods and services to make them more expensive and protect domestic businesses

What is the main purpose of tariffs?

To act as a protectionist measure for home-country businesses

What is an advantage of tariffs?

They provide government revenue and protect domestic businesses

What is a disadvantage of tariffs?

Imported goods become more expensive and may lead to retaliatory tariffs

What is a trading bloc?

A group of countries that provide special trade deals to promote trade between members

What is an example of a trading bloc?

The European Union (EU)

What is an advantage of trading blocs?

They promote free trade without tariffs and often allow free movement of labour

What is a disadvantage of trading blocs?

Trading outside the bloc is expensive and countries are usually limited to one bloc

What is e-commerce?

Any business transaction that takes place using the internet

Why is e-commerce important for growing businesses?

It gives access to global customers, operates 24

What is an example of a small business using e-commerce?

A clothes shop in Manchester selling products online, including to overseas customers

What are advantages of e-commerce for a business?

It is open 24

What is the marketing mix?

The combination of product, price, place, and promotion strategies for selling products

Why must businesses adapt the marketing mix internationally?

Different countries have different beliefs, income levels, and demands