1
Q
What does business growth mean?
A
Business growth is when a company expands its operations, revenue, or market share over time.
2
Q
Give two reasons why businesses may want to grow.
A
- To increase market share and profitability. 2. To gain stronger market power over customers and suppliers.
3
Q
Explain how economies of scale encourage growth.
A
As output increases, firms can reduce unit costs due to bulk discounts and efficient production.
4
Q
What are the two main types of business growth?
A
Organic (internal) growth and inorganic (external) growth.
5
Q
What is retrenchment?
A
Retrenchment is when a business reduces the scale of its operations, such as closing outlets or reducing staff.
6
Q
Why might a business retrench?
A
To reduce costs and focus on survival during difficult times.
7
Q
Define organic (internal) growth.
A
Organic growth is business expansion driven by reinvested profits or loans rather than mergers or takeovers.
8
Q
Give three methods of achieving organic growth.
A
- Increasing market share. 2. Product diversification. 3. Expanding into new markets or opening new stores.
9
Q
Explain why organic growth is less risky.
A
It is financed by profits and builds on existing expertise within the business.
10
Q
How did Apple achieve organic growth?
A
Apple expanded internationally by opening stores in new countries such as China and India, increasing market share and profitability.
11
Q
How did Google achieve organic growth?
A
Google developed new products like Google Drive and Google Maps to increase market penetration and profitability.
12
Q
How did Disney achieve organic growth?
A
Disney diversified into areas such as theme parks, cruise lines, and television networks to increase sales and profitability.
13
Q
State one advantage of organic growth.
A
The pace of growth is manageable and less risky.
14
Q
State one disadvantage of organic growth.
A
It may be slower than inorganic growth.
15
Q
What is external (inorganic) growth?
A
Growth achieved through mergers or takeovers of other companies.
16
Q
What is a merger?
A
A merger occurs when two or more companies combine to form a new entity.
17
Q
What is a takeover?
A
A takeover occurs when one company purchases another, often gaining control through majority shareholding.
18
Q
Give two reasons why companies merge or take over others.
A
- To expand into new markets or products. 2. To achieve synergies or eliminate competition.
19
Q
What is vertical integration?
A
Merging with or taking over a company at a different stage of the supply chain.
20
Q
What is forward vertical integration?
A
Merging with a firm closer to the customer, e.g. a dairy farmer merges with an ice cream manufacturer.
21
Q
What is backward vertical integration?
A
Merging with a supplier, e.g. an ice cream retailer takes over an ice cream manufacturer.
22
Q
What is horizontal integration?
A
Merging with or taking over a competitor in the same industry.
23
Q
Give two advantages of vertical integration.
A
- Reduces costs by removing intermediaries. 2. Increases control over the supply chain.
24
Q
Give one disadvantage of vertical integration.
A
Possible culture clash or inefficiencies due to lack of experience in the new business.
25
Give one advantage of horizontal integration.
Increases market share and reduces competition.
26
Give one disadvantage of horizontal integration.
Can lead to inefficiencies or higher costs if not managed well.
27
Why might a business become a PLC?
To raise large amounts of capital for expansion through the sale of shares to the public.
28
What is an Initial Public Offering (IPO)?
The process of offering shares of a private company to the public for the first time.
29
Name the world’s largest IPO as of 2023.
Saudi Aramco raised $29.4 billion in its IPO in 2019.
30
Give one advantage of becoming a PLC.
Access to large amounts of capital quickly and at lower cost than borrowing.
31
How does becoming a PLC spread risk?
Risk is shared among many shareholders, reducing financial exposure for individuals.
32
What is meant by increased liquidity for PLCs?
Shares can be easily bought and sold, increasing their value and investor appeal.
33
How can a PLC benefit from a greater public profile?
It raises visibility with investors and customers, helping attract new business.
34
Give one disadvantage of becoming a PLC.
It faces increased regulation and reporting requirements.
35
Why might founders lose control in a PLC?
Selling shares to the public means shareholders and directors influence decisions.
36
What is a potential financial disadvantage of becoming a PLC?
It is expensive to set up due to legal, accounting, and IPO costs.
37
What is a hostile takeover?
When another company gains control by buying a majority of shares without consent.
38
What is capital expenditure?
Spending on fixed assets like equipment, buildings, or vehicles.
39
What is revenue expenditure?
Spending on daily operations such as wages, utilities, and raw materials.
40
Differentiate between internal and external sources of finance.
Internal finance comes from within the business (e.g. retained profit), external finance comes from outside (e.g. bank loan).
41
What are the main internal sources of finance?
Owner’s capital, retained profit, and sale of assets.
42
Explain what owner’s capital is.
Personal savings or funds introduced by the business owner.
43
What is retained profit?
Profit kept in the business instead of being distributed to owners or shareholders.
44
Give one advantage of using retained profit.
It’s a cheap source of finance without interest payments.
45
What is the opportunity cost of retained profit?
Shareholders may miss out on dividends.
46
What is meant by the sale of assets?
Selling unneeded items (e.g. machinery or property) to raise cash.
47
What is a sale and leaseback arrangement?
Selling an asset but continuing to use it by renting it from the new owner.
48
How can businesses improve cash flow internally?
By managing payments—negotiating supplier terms and encouraging customers to pay early.
49
Give one advantage of internal finance.
It is interest-free and quick to arrange.
50
Give one disadvantage of internal finance.
It may limit the business’s ability to invest elsewhere or satisfy shareholders.
51
Analyse the impact of using sale and leaseback on a firm’s liquidity and control.
Sale and leaseback improves liquidity by freeing up cash tied in fixed assets but increases long-term costs and reduces ownership control over property.
52
Evaluate how access to finance influences business growth strategies.
Easier access to finance allows businesses to invest in innovation, acquisitions, and new markets, but excessive borrowing increases financial risk and debt servicing costs.
53
Discuss how a firm can balance profitability and ethical responsibility when growing.
Balancing both requires long-term strategic focus—businesses may invest in sustainable practices or fair trade policies to enhance reputation while maintaining profits.
54
Assess the role of innovation in driving organic business growth.
Innovation helps firms differentiate their products, attract new customers, and increase market share without relying on acquisitions.
55
Evaluate the impact of economies of scale on small versus large firms.
Large firms can lower costs through bulk purchasing and technology, but small firms may retain flexibility and closer customer relationships, balancing competitiveness.
56
Explain how diversification can reduce business risk.
By entering new markets or developing new products, a business reduces dependency on one product or market segment, spreading risk across multiple revenue streams.
57
Evaluate the potential cultural challenges of mergers and acquisitions.
Differences in organisational culture, communication styles, and management approaches can cause friction, lowering morale and productivity post-merger.
58
Analyse why PLCs may attract more investment than LTDs.
PLCs have greater transparency, share liquidity, and perceived stability, encouraging institutional and public investors to fund them.
59
Discuss how market conditions influence the choice between organic and inorganic growth.
In stable markets, organic growth is safer and sustainable, whereas in dynamic markets, inorganic growth allows rapid adaptation to competition or technological change.
60
Evaluate how internal finance limitations might affect a firm’s expansion plans.
Limited internal finance may slow growth, forcing the firm to seek external funding, which can dilute control or increase financial obligations.
61
**Why do business aims and objectives change as a business grows?
They evolve due to internal and external factors to stay competitive
62
**Name four main factors that cause business objectives to evolve.
Market conditions
63
**Example of how market conditions change objectives?
Uber and Lyft shifted from growth (market share) to profitability as competition increased.**
64
**How can technology cause aims and objectives to change?
It enables new ways to reach customers — e.g. Amazon used tech advances to expand into new markets.**
65
**Example of business performance influencing objectives?
Ford stopped producing passenger cars to focus on profitable SUVs and trucks.**
66
**How can legislation lead to changing objectives?
New laws force compliance or create new opportunities
67
**What internal factors can influence business objectives?
Management changes or shifts in company culture.**
68
**Example of an internal factor changing aims?
Microsoft under Satya Nadella shifted focus from software to cloud computing.**
69
**How do aims evolve from start-up to growth?
Start-ups focus on survival; established firms aim for growth through new markets or products.**
70
**What might cause a firm to enter or exit a market?
Entering expands customer base; exiting cuts losses if unprofitable.**
71
**Why might a business grow or reduce its workforce?
Growth needs more staff; cost-cutting may reduce workforce.**
72
**Why might a company change its product range?
To meet demand
73
**Define globalisation.
Economic integration between countries via trade
74
**What are imports?
Goods/services bought from abroad — e.g. UK imports cars (£3.25bn
75
**What are exports?
Goods/services sold abroad — e.g. China exports smartphones ($21.4bn
76
**How do exports affect a country’s economy?
They generate extra revenue and improve balance of payments.**
77
**How do imports affect a country’s economy?
Money leaves the country
78
**Why might a business relocate production overseas?
To reduce costs or access new resources and skills.**
79
**List factors businesses assess when locating production abroad.
Costs
80
**Why are production costs important?
Low costs increase profit margins or allow competitive pricing.**
81
**Why is labour quality and availability important?
It determines production quality and efficiency.**
82
**Why is infrastructure important for location decisions?
Poor infrastructure delays production and raises costs.**
83
**Why do businesses value trade bloc locations?
They offer reduced tariffs and easier trade within the bloc.**
84
**What is political stability and why does it matter?
Stable governments lower investment risks.**
85
**Why might governments offer incentives to MNCs?
To attract investment
86
**Define a multinational corporation (MNC).
A business registered in one country with operations in others (e.g. Starbucks).**
87
**What drives MNC growth?
Globalisation and deregulation.**
88
**Advantages of MNCs for host countries?
Jobs
89
**Disadvantages of MNCs for host countries?
Exploitation of labour
90
**Define protectionism.
Government policies restricting imports to protect domestic firms.**
91
**What is a tariff?
A tax on imported goods to make them more expensive.**
92
**Who pays a tariff?
The importing domestic company
93
**Advantages of tariffs?
Protects infant industries
94
**Disadvantages of tariffs?
Raises prices
95
**What is a trading bloc?
A group of countries with reduced or no trade barriers between members.**
96
**Example of major trading blocs?
EU
97
**Key features of the European Union?
Free movement of goods and people
98
**How can being outside a bloc harm business?
Firms face tariffs and reduced market access.**
99
**Benefits of being in a trade bloc?
Access to larger markets
100
**Drawbacks of being in a trade bloc?
Increased competition
101
**What is trade diversion?
When trade shifts from efficient external producers to less efficient members of a bloc.**
102
**How has e-commerce changed international competition?
It allows global reach and lower operating costs.**
103
**Define the marketing mix.
The 4 Ps — product
104
**Why must the marketing mix adapt for overseas markets?
Cultural and legal differences affect consumer behaviour.**
105
**Example of cultural adaptation in marketing?
Fast-food menus in India exclude beef/pork due to religious beliefs.**
106
**What is an example of marketing translation gone wrong?
KFC’s slogan “Finger-Lickin’ Good” translated in China as “Eat Your Fingers Off.”**
107
**Why are ethics important in business?
Ethical behaviour protects reputation and meets stakeholder expectations.**
108
**Example of ethical issue in business?
H&M faced criticism for sweatshops and introduced sustainable materials.**
109
**Why are environmental issues important?
Poor environmental practices can damage reputation and sales.**
110
**Example of environmental response?
McDonald’s uses sustainable palm oil despite higher costs.**
111
**What are pressure groups?
Organisations that seek to influence business and government decisions.**
112
**Example of a pressure group affecting business?
Greenpeace pressured Nestlé to use sustainable palm oil.**
113
**How can pressure groups change the marketing mix?
Firms adapt packaging
