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Theme 2 - Building a business (2.1 - Growing a business (Business growth))
Theme 2 - Building a business
2.1 - Growing a business
Business growth
What can growth do ?
Benefit from a larger market share
Benefit form economies of scale
Gain more recognition, customers, revenue and profit
Organic growth
When a business grows on its own
Changing its marketing mix
Developing new products
Becoming a public limited company (plc)
:red_cross: It is a much slower growth
:check: Business can maintain its own values without other interference
Inorganic Growth
When a business combines with another business to help grow
Through a merger ( two businesses join together )
Or a takeover ( when one business buys a smaller business )
:check: Rapid growth
:check: Share of resources/skills
:red_cross:: Disagreement and communication problems
Finance options
Internal source of finance
Capital found within a business
Retained profit
- using capital form profits kept from previous years of trading
Cheap, quick and convenient
The money is gone, not available for future problems
Sale of assets
Selling machinery or land
Can make quick profit
Might need those assets in the future, it also looks desperate by the business
Owners savings
Cheap, quick and convenient
Might not have any sayings
May not need cash for private purposes
External source of finance
Capital found outside the business
Loan capital
- lump sum of capital borrowed from a bank
Shared Capital
- a business becomes private limited company by offering shares in business exchange for capital
Stock market floatation
- a business becomes a public limited company by offering shares to the public to buy