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2.1 - GROWING THE BUSINESS - Coggle Diagram

- - - - PROS
        
        Less risk compared to taking over another business.
        
        Can be financed through internal sources.
        
        Growth can be carried out at a steady rate.
        
        Builds on existing strengths of a business.
      - CONS
        
        Growth can be slow.
        
        Growth may be limited by the size of the market.
        
        May be difficult to build market share if the business is already a market leader.
      - DESCRIPTION - Growth through producing and selling more of its own products.
      - EXAMPLES - E.g. launching new products, entering new markets, opening new outlets, expansion overseas, taking advantage of technology.
    - - DESCRIPTION - Growth that take splave by joining with another business.
      - PROS
        
        Tends to be quicker than organic growth.
        
        Increased market share and market power, as
        competition may be reduced.
        
        Risk is spread if products are different to the core products of the business.
      - CONS
        
        Can be expensive.
        
        Managers may not be experienced enough to run the
        larger business efficiently.
        
        International expansion may result in a clash of cultures, language barriers and different laws/buyer behaviour, which may prove challenging for the newly formed business to deal with.
      - EXAMPLES - E.g. mergers, takeovers.
  - - - RETAINED PROFITS - Profits held back in the business for reinvestment rather than being issued as dividends.
        
        PROS - cheap, quick and convenient, and there is easy access to the money.
        
        CONS - once the money is gone, it is not available for any future unforeseen problems the business might face.
      - SELLING OF ASSETS - Selling unwanted assets, such as machinery and equipment.
        
        PROS - convenient, can create space for more profitable uses, and can be quick.
        
        CONS - the business might not get the full market value of the assets or even sell them at all, the business might also need the assets in the future.
      - THE OWNER'S SAVINGS - The business owner’s own savings.
        
        PROS - cheap, quick and convenient.
        
        CONS - the owner might not have enough savings or may need the cash for personal use.
    - - LOAN CAPITAL - Loan capital is a lump sum of capital borrowed from a bank and paid back in instalments.
        
        PROS - regular repayments are made over a period of time.
        
        CONS - sometimes it can take a while for a loan to be approved and the business may not even qualify for a loan, interest is applied, so this can be an expensive option, banks may also ask for collateral (security) in case the business fails to make repayments.
      - SHARE CAPITAL - Share capital is money raised when a business becomes a private limited company by offering shares to a select group of people in return for capital.
        
        PROS - does not have to be repaid and no interest is applied, a business can choose to whom it offers shares.
        
        CONS - profits made by the business are paid to shareholders (these payments are also known as dividends), so control of the business gets diluted.
      - STOCK MARKET FLOTATION - Stock market flotation is money raised when a business becomes a PLC (public limited company) by offering shares to the public to buy.
        
        PROS - this option can raise large amounts of capital as it is easy for the public to buy shares through a stockbroker or bank, the shares don’t have to be repaid and no interest is applied, the business can also gain recognition through this method.
        
        CONS - it can be complicated and expensive and there is the possibility of losing control, as anyone can buy shares, the profits are paid to shareholders and the business records are made public, there is also the risk that some investors will only buy shares to make a quick profit by selling them when the share price increases.