Business organisation
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- Created by: JennD
- Created on: 31-10-16 19:10
What are the 5 reasons why someone might decide to expand their business?
Get better economies of scale, diversification, financial support, personal vanity and dommination of the market
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Definition of economies of scale
Buying in bulk to decrease the cost to the consumer
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Definition of diversification
Merging of taking over a business completely different to your market sector e.g Coca Cola take over Topshop
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What are the advanatges by being a large company and investment?
Bank are more likely to give you money as you are reliable and the government are more likely to give you money to employ more people
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What are the advantages of having a bigger market share?
You control products more meaning there are less threats. Also you are able to control pricing. Maybe you could make the prices so low that no other business can compete with you
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What are the 3 main methods of internal growth?
Producing more current products, sell an existing product to new markets (possibly abroad) and create a new product
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Definition of organic growth
Growth from within
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Definition of inorganic growth
Growing exteranally
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3 advantages of internal growth
Inexpenive to achieve, less likely to go horribly wrong and you can choose the business direction
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3 disadvantages of internal growth
Takes a long time, harder to build market share and chance that people may not like the businesses new direction
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4 examples of external growth
Buying a suppliers company, being closer to the customer, buying a competitor and buying a new unrelated firm
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Definition of a merger
When 2 business decide to operate under 1 name
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Definition of a takeover
Assumption of control of another (usually smaller) firm through purchase of 51 percent or more of its voting shares or stock.
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3 advantages of external growth
Faster access to new markets, you overcome the hard entry to new markets and you have more control of suppliers
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3 disadvantages of external growth
Workers may becomes unmotivated with new business systems, some takeovers are hostile (buying up shares without the business knowing) and it can make alot of people redundant
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How is franchising a good form of external growth?
It increases brand awareness, reduces the usual costs and risks of opening a new business, allows the business to achieve a greater economy of scale and it allows them to run as seperate businesses, whihc saves money on wages and other costs
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Growth affects what stakeholders?
Suppliers, employees, government, shareholders, customers and the local community
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Definition of a stakeholder
Anyone who has an interest in a business
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Definition of a Public limited company
A busienss that sells it's shares to anyone. It has plc after it's name
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What are the advantages of becoming a plc?
Have limited liablity, raise capital through shares, allows the company to grow and diversify and the banks are more likely to lend them money
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What are the disadvantages of becoming a plc?
Shareholders own the business, other people make the 'day-today' business decisions whihc may go against the shareholders ideas and buisness direction, higher risk of a takeover and shareholders want money, but you might want a new busienss direction
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What may 3 be business aims for larger businesses?
Dominate the market, expand overseas and make the business more envrionmentally friendly
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4 expamples of social costs
Environmental costs, renewable resources, less harmful products and ethical considerations e.g. cheap labour and animal testing
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4 examples of social benenfits
Taxes on business goes up, provide more jobs, providie essential resources e.g. health and transport and they provide prodcuts that improve health, safety and wellbeing
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How may a business make it's business socialy better?
Fair-trade resources, less animal-testing, enviornmentally friendly packaging and prodcution and using renewable energy resources
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What are the advanatges of becoming a multinational business?
Keep transport costs down, increases their knowledge of local market conditions, allows you to avoid trade barriers, can reduce the risk of foreign exchange fluctuations, acces raw material and cheap labour and possibly avoid paying tax
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What are the disadvanatges of becoming a multinational business?
Possible language barriers, unskilled workers, social and ethically wrong, the country may not warm to your product/service, more chance of faliure and stakeholers may not agree with your new direction
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Other cards in this set
Card 2
Front
Definition of economies of scale
Back
Buying in bulk to decrease the cost to the consumer
Card 3
Front
Definition of diversification
Back
Card 4
Front
What are the advanatges by being a large company and investment?
Back
Card 5
Front
What are the advantages of having a bigger market share?
Back
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