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Business Studies Unit 2: Growing as a Business

The Business Organisation

Expanding a business

Benefits of expansion:

Diversification ­ larger firms can afford to produce more profits than smaller firms. They are
able to sell into different markets, reducing the risk that a decline in sales of one product will…

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Or they could launch a completely new product ­ diversification

Inorganic/External Growth ­ expansion outside of the business

Takeover ­ when one business buys out another business
Merger ­ when two separate businesses agree to become a single business
Franchising ­ selling the right to use your businesses idea and…

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Impact on Stakeholders

STAKEHOLDER: anyone with an interest in the business

Stakeholder Benefit Drawback
Owners Increase profit Less control
Reduce risk
Workers Greater job security Less involved
More opportunity Less personal
Increased chance of larger Less multitasking
wage/promotion More demanding
Customers Economies of scale (lower Fewer competition, higher
prices) prices…

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Limited liability Media covers
Sells shares to the mistakes
public Can't control who
Lots of shares that buys shares
are regularly Risk of losing business
invested Original owner may
Media coverage not agree with new

Public Limited Companies (PLC)

Large business that sells shares to the public

Changing Business…

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Business ethics: refers to whether a business decision is seen as morally right or wrong, an ethical
decision is made on the basis of what you think is right

Ethical issues consist of; animal testing, waste disposal, fair trade, child labour and pollution

To be ethical, a business could; donate…

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Narrow portfolio: limited market, economies of scale, specialisation, limited customers and hard to
get repeat sales

Boston Matrix:

Market Growth:

Are the numbers of potential customers in the market
growing or not?

Market Share:

Does the product being sold have a low or high market





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Maturity ­ sales are near their highest, but the rate of growth is slowing down, e.g. new
competitors in market or saturation

Decline ­ final stage of the cycle, when sales begin to fall

Extension strategies extend the life of the product before it goes into decline. Again businesses use…

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Sponsorship: businesses can sometimes help to pay for events such as sport competitions, TV shows
or exhibitions arts- theatres, art galleries, concert halls, makes businesses look classy. Creates high
profile, yet if what you're sponsoring gets bad publicity your companies image suffers too

Advertising: TV, radio, internet, billboards



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Profit and Loss Accounts and Balance Sheets

Profit and loss account looks at all of the things that
you have bought and sold across the year and takes
away all of the costs you had to pay during that year.
If you make more money than you have to pay…

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NON CURRENT ASSETS: value of assets that the business has purchased and expects to keep for
more than one year

CURRENT ASSETS: cash, cash equivalents, expected to be turned into cash during the next year

LIQUIDITY: how easy it is to turn current asset into cash

LIABILITIES: debts sum of…


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