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business studies paper 2 (the business organisation (why do firms grow?…

- - - - the firm can produce more of its current products to continue to sell them in their existing markets
      - the firm could begin to sell its existing products within different markets
      - the firm could launch a new product in a similar line (line extension) or a totally new product diversification)
      - advantages
        
        it is relatively inexpensive with the exception of diversifying companies are usually very good at what they already do meaning doing more of it would not be particularly difficult
      - disadvantages
        
        it takes a long time to achieve growth and many owners are not prepared to wait that long for change
  - - - mergers and takeovers are usually unsuccessful as management styles are often different between two firms and it is very hard to make two very different businesses work as one
  - - - takeovers can be particularly hostile and unpopular creating a bad feeling and uncomfortable working environment
  - - - goverment
        
        can charge higher tax
      - suppliers
        
        increased sales
      - customers
        
        will benefit from larger companies
      - employees
        
        have more job security
      - local community
        
        increased jobs act as a benefit however noise and pollution is a negative for the local community
      - shareholders
        
        benefit in terms of the worth of their shares if profit increases
  - - - could lose control
    - - increased statues
      - raise huge sums of capital
  - - - larger firm produce a lower average cost than smaller firms and these economies of scale can be passed onto customer who therefore receive lower prices
    - - larger the firms have opportunity and can afford to produce more products than smaller firms.They can sell into different markets reducing risks as if their is a decline in sales in a particular market the products in the other markets can reduce the threat to the companies profits
    - - larger firms are less likely to have financial difficulties than smallet firms this is because they have the ability to borrow vast amounts of money from banks and additionally larger firms have a higher chance of receiving payments and funding from the government.
- - - - introduction
        
        growth
        
        maturity
        
        decline
  - - - price is set bellow the cost when new and then prices are increased when the brand is fully established
    - - low prices to begin with in order to penetrate into the market
    - - prices are put at a deliberately high level in order to make consumers think they are buying a luxury iteam and are willing to pay more for it
    - - every iteam is given a mark up or a profit margin Is used in order to guarantee profit with ever unit
- - - - firms can raise money by selling their fixed assets
    - - a limited company can issue more shares to improve the finance of a buisness
    - - retained profits from many years build up savings
    - - long term loans
    - - profits that have been kept back
    - - large buisnesses may still need to borrow money from the bank
- - - - staff can be motivated by remuneration -these are increases in salary or bonuses they act as motivation
    - - can motivate as it makes staff feel that they are good at their job -opportunity for promotion as workers are better skilled
    - - at the beginning of the year manages meet with staff in order to set goals for the year-if these are meet then the worker will get a reward for example higher pay