External growth

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  • Created by: Jchannell
  • Created on: 15-04-18 12:43
A business may want to grow for a number of reasons, for example:
-The entrepreneur wants a greater challenge-The owners want higher returns on investments-Growth, expanding into different markets can spread risk-A bigger business can fight off any economic or competitive challenges-Gain economics of scale(unitcost
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The effects business size has on its stakeholders: Employees advantages:
+Greater job security+Larger firms will have specialist human resources department which will ensure compliance with legislation+The business will recognize the trade union and improve communication
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Employees disadvantages:
-Feeling remote from those that make the decisions that affect them; loss of motivation and less productivity. -Problems of effective co-ordination and control that negatively impact upon the business's operation and profitability.
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Suppliers:
+regular orders+Large orders+Security. -May be offered a 'take it or leave it' approach. - Over dependence on one customer can cause problems if they change supplier.
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Local community:
+Creation of jobs+Multiplier effect+Community initiatives from large firm. - Possible negative effects such as pollution and congestion -A large business may drive existing local firms out of the market.
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Shareholders:
+Large firm may have market power and increase prices, leading to higher dividends, profits and share prices+Gain managerial economies of scale and improve performance. -If managers make the wrong decisions it can have a large effects on**
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Shareholders:
**profits and dividends. -Large businesses can be organizationally inflexible, therefore can be hard to turn around when fading. Meaning dividends can take a long time to rise again.
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Customers:
+The business can 'seek out'/develop new products.+Economies of scale lower costs and therefore prices.+Business can be expected to treat customers well in order to keep positive image. -Diseconomies of scale may raise costs, and therefore prices
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Customers:
-Customers may be swayed into buying products they do not want due to contact marketing. -If the point of contact with the business is a call centre then customers will feel that the business is remote, and feel powerless and neglected.
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Organic Growth: Is achieved by increasing the firms _____, this comes from selling to more customers, new or existing. If a business has ________ organic growth then it shows that the managers are making the correct decisions in marketing**.
sales, constant
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**and ________ management.
Resource
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Mergers and acquisitions: A merger is where ___ companies join together to from a new ______ business. A takeover involves acquiring control of a company by buying ______.
two, larger, shares
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If a takeover bid is successful then the target company will still exist as a __________ legal entity, if ____ sets of ____________ see it as beneficial. It could also be resisted and regarded as '_______'.
independent, both, shareholders, hostile
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Joint Ventures: is a formal business arrangement between two or more businesses who commit to ____ together for a particular _______. This is different from a merger because there is no change of _________.
work, project, ownership
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A joint venture often ends in the creation of a new business to _________ the venture.
Implement,
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Why undertake a joint venture?
The capital cost of a venture may be extremely high and therefore splitting the cost makes it possible. -A single business may consider the venture too larger of a risk. -It enables a business to share strengths, and gain a competitive advantage.
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Why undertake a joint venture**?
A joint venture can be an effective way to access markers or resources in another company.
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However, a joint venture will eman drawing up a contract of responsibilities and goals, which is an _________ procedure due to legal cots, however is vital when avoiding ____________.
Expensive, disagreements
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Strategic alliance: is similar to a joint venture, however 'alliance' means co-operation, rather than a ___________. It is less involved and less permanent, yet has similar _____. With a strategic alliance, there won't be a new firm and each firm
Partnership, goals
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*** Will keep its own ________.
Identity
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Are Joint ventures and strategic alliances beneficial for a business's stakeholders?
The venture/alliance could fail, and the expected stakeholder benefits fail to materialize. -The relative strengths of each firm when the agreement is made, the stronger firm can demand conditions.-The contract needs to be clear, to reduce anytrouble
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Are Joint ventures and strategic alliances beneficial for a business's stakeholders**?
It largely depends on the intergrity of thoser working together and how problems that arise during the venture are resolved. Both parties need to stick to the agreement. -All stakeholder groups need to be equally, typically shareholders are put first
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Other cards in this set

Card 2

Front

The effects business size has on its stakeholders: Employees advantages:

Back

+Greater job security+Larger firms will have specialist human resources department which will ensure compliance with legislation+The business will recognize the trade union and improve communication

Card 3

Front

Employees disadvantages:

Back

Preview of the front of card 3

Card 4

Front

Suppliers:

Back

Preview of the front of card 4

Card 5

Front

Local community:

Back

Preview of the front of card 5
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