Business Mocks Question 4

  • Created by: Rapids_12
  • Created on: 09-12-17 16:32
What are the advantages of busineess growth?
You may be able to cut costs, win greater shares of markets, develop new products or to sell to new markets.
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What are the 2 types of business growth?
1 Internal (inside the business) 2 External (joining together with existing businesses)
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Internal Growth
Called 'Organic growth': expansion comes from asking owners to provide more capital or from ploughing back profits. Internal growth involves investing in new products or selling more existing products.
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What are the disadvantages of internal growth?
It is quite slow for small businesses as money comes from the owners as they don't risk trying to borrow money. Many small business grow organically.
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External Growth
The takeover of another business or merger with another business.
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Why do business carry out external growth?
1 buy new and exciting brands where sales are likely to be high 2 acquire new inventions and technology 3 break into new markets (maybe in new countries)
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When 2 businesses combine to form a single business. Existing shareholders retain a shared interest in the new business.
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Occurs when one business gains control of part of another business. A business may sell off one of its divisions that it no longer wishes to keep.
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How can you raise money in a big company?
Sell shares (units of ownership in a business). Someone who has this is a shareholder, typically they have multiple shares. This is internal finance.
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Internal Finance
Capital raised within a business (e.g. owners/shares/profits made/having a partner(s)/sell assets
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Trade Credit (EF)
The time between recieving the good/service and paying for it.
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An arrangement with a bank on an agreed drawing limit on a current account. Interest is calculated on the level of overdraft on a daily basis. It is usually a short term finance used to ease cash-flow problems.
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Hire Purchases
Major banks have links with finance houses which provide a variety of schemes for customers to make payments over time. Goods that are hired remain the property of the finance company untill all payments are made.
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Leasing Purchases
Enables a company to use an asset without paying for it. The lessee uses the asset and makes regular payments to the lessor (the owner).
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Sums of money typically lent for a specific purpose (e.g. to buy an asset). Interest is charged on the amount owed.
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Government Grant
The government provides finance for the business for particular purposes (e.g. to update machinery)
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Venture Capital
Venture capital companies provide finance in return for shareholding and control in the organisation.
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Examples of Short Term Finance
Trade Credit, Overdraft, Leasing and Hire Purchase, Loans.
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Examples of Long Term Finance
Government Grants, Mortgages, Venture Capital, Shares.
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How does a business pay back money to owners who inject money>
They can give the owners a good return for their investment by giving out a high dividend to a shareholder.
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What are the disadvantages of external finance?
Businesses are legally bound to prioritise paying back payments such as loans and mortgages ahead of giving out rewards to shareholders for example. Therefore the balance between external and internal finance must be correct (e.g. debts may incur)
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Gearing ratio
The ratio between capital raised internally (owner's funds) and capital raised externally (external finance). If a high percentage of finance is borrowed, it is referred to as a high gearing ratio.
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When is it risky to have a high gearing ratio?
When profits fluctuate a lot. It can also be risky as sometimes the amount owed is greater than the rate of interest.
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Why is it bad to have a low gearing ratio?
Normally it means a business is short of capital because it does not borrow money.
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Job Description
A written document relating to a particular role, indicating, for example, job title/hours of work and what the job entails. This is used a lot in business recruitment
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What is good recruitment?
Good recruitment is selecting the most suitable person for the job, not necessarily the most highly qualified.
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When is busienss effectiveness achieved?
When clear criteria is established for recruiting new employees, e.g. appropriate skills, experience and qualifications.
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Job Specification
The mental and physical requirements to carry out a role effectively. These tend to set out the basis for job advertisements and help applicants and post holders know what is expected.
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What should job specifications include?
Enough information to attract suitable people and act as a checking device that the business is attracting people with the correct skills to be given interviews.
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What requirements for a job does a job sepecification include?
An introduction, details of the job, post reference number, management responsibilities, educational requirements, personality traits.
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Who chooses the person for the job?
An employer or interview panel will choose someone with all the essential requirements, if there are more than one then they will choose someone with desirable requirements.
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What can these descriptions/specifications be used for?
They can be used to form the basis of framing interview questions and tests.
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Who do websites target?
Local, national and international job seekers.
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Who do national newspapers target?
Often targeted and special interest groups who seek jobs, they often target certain people on specific days.
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Who do local radios target?
Local recruits, particularly in urban areas.
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What are other alternative advertising medias?
Vacancy boards/noticeboards, adverts on public transport and transport stations.
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Why is the cost of advertising taken into consideration?
A small company will use a cost effective media for a less popular role so may use shop windows or job centres, whereas a top executive job may be advertised nationally over national papers and websites as they try to attract the best person.
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The desire or willingness from within an individual to do something or the reason why people act or wave in a certain way.
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Workers seek maximum reward for minimum effort so he changed it so detailed instructions and careful management of tasks were done and employees were motivated by pay.
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What were his 3 main implications?
1 managers collect knowledge about work tasks systematically 2 worker's control over what they do is removed 3 managers lay down standard procedures and time limits for completed tasks.
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Fordism (Like Taylorism)
Work is organised for workers who seek high financial rewards.
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Workers have aspects of work that motivate them, but there are factors (e.g. hygiene) that lead to dissatisfaction if not met. Therefore managers need to consider both factors to improve performance ensure there is no dissatisfaction.
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Herzberg Motivators
Called 'Satisfiers' and they relate to a worker's personal development, recognition, promotion, responsibility and the nature of work. Although money is a good incentive, it wasn't seen as a long-term motivation and would wear off, unless linked with
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Herzberg Demotivators
Called 'Dissatisfiers' and relate to working conditions, company policy and management practises, relationships and salary.
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Payment Systems
The money an employee earns and may include rewards/bonuses/incentives.
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Flat Rate
A set rate of pay based on a set number of hours worked. (E.g. £200 a week)
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Benefits of Flat Rate
Easy to calculate, cheap to run.
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Time Rate
A worker receives a set rate of pay but receives an overtime rate on any extra hours worked. (E.g. 150%)
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Benefits of Time Rate
It is a good way of encouraging employees to work longer hours (e.g during holiday periods)
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Piece Rate
Payment is determined by the amount of items produced to a given quaity standard.
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Advantages of Piece Rate
Encourages effort and a higher quality of output from employees.
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Disadvantages of Piece Rate
It is not suitable for jobs that require time and care and it's also hard to measure this quality of output for jobs that don't make products (e.g. teachers/doctors)
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A payment used as additional encouragement for workers, it can be paid out of additional profits by the company, as a result of worker's hard work and efforts.
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Advantages of Bonus
Rewards and shows recognition to high performance and can be targeted for high performers.
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A payment determined by a percentage of the sales a salesperson makes. E.g. 10% of every sale or an hourly rate plus a 5% commission per sale.
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Advantages of comission
Directly relates pay to sales made or other measures of output.
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Performance Rates
An employee is set targets to achieve based on some form of work measurement. E.g. having 1 hour to do a task, if done in 1 hour a set rate of pay is received, if done quicker (exceeding the target) additional payments will be received.
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Advantages of Performance Rates
Directly links pay to meeting or exceeding targets.
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Profit Sharing
Pay varies based on the level of profit a company makes. If profit reaches/exceeds a target, the additional profit made is paid out to employees at a set amount each or as a percentage of their salaries. This is usually in addition to other bonuses.
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Advantages of Profit Sharing
Recognises the importance of hard-working employees in helping a company achieve higher profits and helps workers see how their hard work affects the income of a company.
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Fringe Benefits
Non financial incentives (e.g. service or property provided) in addition to financial rewards.
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How do fringe benefits attract employees?
They act as incentives for employers to stay and work hard for a company as they satisfy maslows hierarchy of needs.
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Fringe Benefits and Maslow's hierarchy?
Physiological: Housing provides shelter and subsidised canteen provides cheap food. Safety and Security: Insurance and health care benefits (company pays employee's health) Love: Sports clubs/activities where employees bond together.
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Fringe Benefits and Maslow's hierarchy?
Esteem: Company cars and laptops, give leisure time more variation and keeps workers happy. Self-actualisation: company plays for training courses and higher education, workers become better skilled and capable at their job.
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How is it important to offer the most suitable fringe benefits?
Workers want usable benefits such as in a rural area you may want a car or if in an urban area you may want public transport tickets or school fees for your children to be paid.
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How do companies make workers enjoy working for them?
They may provide sports tickets or cinema tickets for their leisure time or pay for a meal at a restaurant or a taxi journey home for those who work extra hours.
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How do subsidised products/services help a worker?
It helps to subsidise an employees income.
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Other cards in this set

Card 2


What are the 2 types of business growth?


1 Internal (inside the business) 2 External (joining together with existing businesses)

Card 3


Internal Growth


Preview of the front of card 3

Card 4


What are the disadvantages of internal growth?


Preview of the front of card 4

Card 5


External Growth


Preview of the front of card 5
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