Business Studies - Unit 2

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What are the two main catorgaries of expansion?
Organic and inorganic.
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What is organic growth?
Growing through internal methods.
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What are the benefits of opening a new branch as part of organic growth?
Slow and steady, paid for with reatined profts, easy to manage/control.
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What are the disadvantages of opening a new branch as part of organic growth?
Too slow for owners and market share coulfd fall.
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How can in organic growth (external growth) be achieved?
A merger or takeover.
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Name each type of integration with an example?
Vertical backwards - building firm takes over brickwork firm, diversication - between a steel company and a food retailer, horizontal - betwwen two sports shops and vertical forward - farmer buy food shops.
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What are the benefits of horizontal integration?
Lead to an increase in market sharen reduces competition and economies of scale are more likely as the buiness will be at the same stage of production.
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What are teh benefits of vertical backwards integration?
Offers a reliable source as a supplier.
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What are the benefits of vertical forwards integration?
Offers a reliable outlet for products.
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What are the benefits of diversification integration?
Spreads risk over more than one industry.
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What is a market follower?
A business that is content to follow the market leader without attempting to challenge it's position.
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Describe the launch stage of the product life cylcle?
The product is launched, sales may start to grow as consumers get to kno wthe product.
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Describe the growth stage of the product life cycle?
The product becomes more well - known if the product is advertised well. Sales will grow if consumers like the product.
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Describe the maturity/saturation stage of the product life cycle?
Sales level off as competition enters the market or consumers tastes change.
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Describe the decline stage of the product life cycle?
Sales fall as the prduct becomes less popular. It may even be eventually taken off the market.
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Why do businesses promote?
To inform customers of new products, to create a brand image, to support other marketing decsions (price reduction) or to help achieve sales growth.
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What are four methods of promotion?
Advertising, sales promotion, direct marketing (email ect) and sponsorships.
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What affects the selection of the promotional mix.
Cost and affordability, nature of the product, nature of the market and commpetiotors promotions.
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What is competitive pricing?
Matching competitors pricing.
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What is loss leader pricig?
Offering products or serveces at alarge discount.
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What is price skimming?
Settin a high price, accepting lower sales.
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What is price penetration?
Setting lower prices to attract customers quickly.
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What is direct distribution?
Product/services delivered direct to the customer from the business.
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What is indirect distribution?
Hving a partner is the distribution chain, such as a wholesaler of retailer.
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What do profit ad loss accounts do?
Summarise sales revenue and payments or expenses for the financial year.
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How do you calculate the gross profit?
Cost of sales - Sales.
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How do you calculate the net profit?
Gross profit - total expeenses.
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How do you calculate the gross profit margin?
(gross profit/sales revenue) * 100
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How do you calculate the net profit margin?
(net profit/sales revenue) *100
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What is an asset?
Anything that is owned by the business?
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What is a fixed asset?
Assets kept for many years which create revenue for the company and a general profit.
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What is a current asset?
Assets that a business expects to have for a short time.
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What are liabilities?
The amount owed by a business to another business or individula.
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What is a current liability?
Something that will be payed back over the long term, in more than a year.
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What is a current liablity?
Short term and usually have to be payed back within a year.
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What are the net assets?
Value of the businesses assets after all liabilities have been subtracted.
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What is the formula for the acid test?
(Current assets - stock)/liabilities.
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How do you calculate the current ratio?
Current assets/current liablities
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What is flow production?
This is large scale production where each stage of production is carried out one after another, continuously on a production line.
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What is lean production?
This is a production approach that aims to use fewer resources by using them effdicienty. Examples are JIT, checking quility and
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Other cards in this set

Card 2

Front

What is organic growth?

Back

Growing through internal methods.

Card 3

Front

What are the benefits of opening a new branch as part of organic growth?

Back

Preview of the front of card 3

Card 4

Front

What are the disadvantages of opening a new branch as part of organic growth?

Back

Preview of the front of card 4

Card 5

Front

How can in organic growth (external growth) be achieved?

Back

Preview of the front of card 5
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