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Flashcards in Growth of Business Deck (27)
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1
Q

what are the reasons for business growth

A
  • greater surplus (public image)
  • I higher profits if sales increase
  • lower average costs (bulk buy)
  • bigger companies greater public image
2
Q

what is organic growth and how can it expand

A

It occurs when a business expands internallly by;

  • opening more branches or factories etc
  • engaging in product development to extend the rage
  • employ more staff increasing product capacity
3
Q

what is external growth

A

it occurs when a business integrates with another business through merger, acquisition or take-over

4
Q

what is merger?

A

when 2 owners of a business agree to join and make a new business

5
Q

what is acquisition

A

purchase a business by another directors permission

6
Q

what is take over

A

when one business buys out owners of a business and takes control

hostile take over is without permission

7
Q

what is backwards vertical integration

A

SUPPLIER

previous stage of production- sourcing the materials

8
Q

what is forward vertical integration

A

CUSTOMER

next stage of production in the chain

9
Q

what is horizontal integration

A

COMPETITOR

same stage in production process

10
Q

what is conglomerate integration

A

UNRELATED INDUSTRY

entering an entirely different market

11
Q

what is lateral integration

A

RELATED INDUSTRY

connected product or service- an associated item but not in direct competition

12
Q

what are the reasons a business would want external growth

A
  • increase market domination
  • gain technical advantage (new tech)
  • access to new markets
  • prevent org becoming take over
13
Q

what are issues with external growth

A
  • requires lots of funding
  • no guarantee as structures will merge
  • culture could clash (conflict)
  • key employees leave, loss of experience
14
Q

what is de-merger

A

split into 2 org to operate independently and gain better cash flow

15
Q

what is divestment

A

a business sells or closed minor areas of its business. this could reduce size of product range

16
Q

what is deintegration

A

breaking up a whole into smaller elements. making it easier to manage

17
Q

what is asset stripping

A

a business buys another that is ‘going cheap’ selling off profitable elements

18
Q

what is outsourcing

A

firm hires another external agency to complete a non core activity
(printing, security etc)

19
Q

what is management buy out

A

managers buy the business from owners to keep their job, taking advantage of their knowledge of the industry

20
Q

what is management buy in

A

a group of managers outside take over the business

21
Q

what are multinational corporations

A

a large company that produces and sells goods in more than one country. that structure is usually a parent company with subsidiaries.
usually have billion$ turnover

22
Q

why would someone want to set up a MNC

A
  • access to wider market
  • cheaper set up costs
  • reduced costs of production
  • global brand
23
Q

what is the negatives of setting up an org in another country (MNC)

A
  • inappropriate infrastructure
  • not good enough staff
  • communications
  • big competitor
24
Q

what is a franchise

A

a small business owner that buys the right to sell the product of a large established company

25
Q

what is the franchiser and what do they do

A

large business selling the rights to sell a product.

  • sets the rules
  • takes strategic decisions
  • limited liability
26
Q

what are the advantages of a franchise deal

A
  • establish product with a ready market
  • franchiser provides support
  • nationally recognised brand name and ads are paid for by franchiser
  • easier to instant funding
27
Q

disadvantages of a franchise decision

A
  • franchisee has limited decision making
  • cannot sell business without permission
  • has no ownership of the business
  • franchiser gets percentage of profits