Unit 2 - The business organisation - Flashcards in GCSE Business Studies

Reasons for business growth

increase sales+market share, take advantage of economies of scale and becoming secure.

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Reasons for not expanding

keep full control, offer personal service, avoid too much risk and avoid increased work load+worry

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Define organic growth/internal growth with examples

expansion within the business. e.g.: opening more branches or through internet selling.

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Benefits and drawbacks of opening new branches

less risky due to it being slow, no need for loans and easier to manage+control. However its too slow for some owners, market share can fall and no gains from integration

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Benefits of business expansion through franchises

business growth is paid for by franchisee paying fees, franchisee likely to have high incentive to expand their business, management problems of each outlet is not dealt with original business.

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Drawbacks of business expansion through franchises

a franchisee many not keep to their legal agreement, most profits kept by franchisee not original business, if one franchise performs poorly it can damage whole business.

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Define inorganic growth/external growth

expansion by merging or taking over another business.

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Define horizontal integration and its benefit

joining two business together in the same industry and same stage of production. This can lead to increase market share , reduces competition and gains economies of scale.

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Define Vertical Backward integration and its benefit

joining two businesses together in the same industry but different stages of production towards the supplier. This offers reliable supplies of material.

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Define Vertical Forward integration and its benefit

joining two business together in the same industry but different stage of production towards the customer. This offers a reliable outlet for products.

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Define diversification and its benefit

joining two business in different industries. This separates risk over more than one industry, while one industry falls in demand the other might be expanding,

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Disadvantages of inorganic growth

expensive to take over another business, problems of managing+controlling a larger business, vertical integration+diversification management may lack experience of the other business, the products they sell+markets they sell in.

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Advantages and disadvantages of business growth towards the owners

high level of profits+sales but theres an increase in responsibility and stress if owner is also the manager.

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Advantages and disadvantages of business growth towards the workers

might be opportunities for promos+greater job security but may be job losses if jobs are duplicated in a merger or takeover.

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Advantages and disadvantages of business growth towards the customers

prices may be lower therefore firm can benefit from economies of scale but prices could rise during a merger or takeover as theres fewer competitors.

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Ways to defend stakeholder interests (CUSTOMERS, WORKERS AND SUPPLIERS)

W- try to stop job losses flooring merger or takeover+negotiate for higher pay. C- check prices carefully+use consumer groups to pressure larger firms to offer better value. S- insist of reasonable prices for products supplied+prompt payment.

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Advantages+Disadvantage of becoming an Ltd.

higher status than partnership or sole trader, attracts private investors to buy shares and offers limited liability. But it can't be listed on stock exchange, share prices are not quoted and scope for expansion intro larger business is limited.

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Advantages+Disadvantage of becoming a PLC.

able to raise high capital for expansion, higher status than Ltd and limited liability, But original owners lose control, company can be taken over and all main accounts must be disclosed to the public leading to large publicity and scrutiny.

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List of changed business aims and objectives

profit growth, market share increase, increasing shareholder value and managerial objectives.

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Define ethical objectives + Example

a business aim to do the "right thing" according to the managers beliefs and values even if it is not the most profitable way. EG- pay workers in low wage country more than average rate.

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Define environmental objectives + Example

a business aim to protect environment during operations to reduce social costs. EG- to recycle waste water.

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Define social costs + Example

costs of a business activity including both financial costs paid by the firm+the costs on society. EG- factory pollution

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Factors affecting location choice

costs of site, transport costs, labour costs, sales potential, manager preferences

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Reasons why business change objectives

Laws on environmental protection are stricter. Growing+widespread public support for action against dumping waste+climate change. Consumers are putting pressure on firms to be ethical.

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Get Revising

Unit 2 - The business organisation

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