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UNIT 2.1 - GROWING THE BUSINESS - Coggle Diagram
UNIT 2.1 - GROWING THE BUSINESS
2.1.1 - BUSINESS GROWTH
Businesses can grow EXTERNALLY or INTERNALLY
INTERNAL growth - when a business grows by growing it's own operations
Businesses can grow INTERNALLY by:
Launching new products
Opening new stores
Increase production capacity
EXTERNAL growth - growth achieved by acquiring another business
Businesses can grow EXTERNALLY by:
Mergers - when 2 businesses combine to make one larger business
Takeovers - 1 firm buys a controlling stake of another firm
Advantages?
Diversify risk
Rapid expansion
Reduces competition
Disadvantages?
Tension and lost jobs
It is complicated
Demotivated employees
2.1.2 - FINANCE
Internal sources of finance (money raised within a business):
Personal savings
Selling assets
Retained profit
External sources of finance (raising money from a third part):
Bank loans
Mortgages
Loans from family and friends
Trade credit
Governent grants
Share capital
Overdrafts
Factors affecting best sources & methods of financing:
New vs Established business
Long term vs Short term
Cost
Financial situation
2.1.3 - CHANGES IN BUSINESS AIMS & GLOBALISATION
Why do business objectives change?
Stage in business life
New legislation
Changes in the economy
Changes in society
Changes in technology
Globalisation
The process where people, businesses, governments and markets around the world become more connected
Benefits
Single global market
Access more consumers
More growth opportunities
Face more competition
Reduce costs
Import cheaply from other countries
Rent or labour costs may be lower
Enables the business to cut costs and increase profits
Drawbacks
Increased competition
Negative effect on profits
High UK wages
Ethical issues
Involving the working conditions in developing countries
Fluctuating global economy
2.1.4 - ETHICS & BUSINESS
Ethical considerations for Businesses
Labour in developing countries
Low wage rates in places such as China.
Product development
Animal testing
Employee welfare
Ethical companies will give their workers:
Fair wages
Reasonable hours
Holidays
Pleasant working environment
Buying fair trade products
Reflects customer trends
Can often be more expensive
Means the producers of the product (farmers) get paid fairly
Trade off between ethics and profit
Acting in an ethical way can increase a business' costs
If revenue is flat and costs rise, this will have a negative impact on the business
Benefits of being ethical
Marketing
Can advertise based on their ethicalness which helps to develop a positive public image and increase sales
Employee motivation and culture
If employees are treated ethically, they are more likely to maximize their efforts for the business which increases its productivity.
Stakeholders
Other stakeholders are affected if a company acts in an ethical way and this benefits the business
Treating the customers nicely, means the customers will want to come again
Some shareholders are more likely to invest in an ethical company because it gives them a moral purpose
2.1.5 - THE ENVIRONMENT & BUSINESS
Many businesses have been put under pressure by customers, governments and employees to reduce their negative impact on the environment
Environmental issues
Traffic congestion
Careless waste disposal
Air and noise pollution
Poor choice of materials
Lack of encouragement of public transport use
Businesses can improve their environmental contributions by:
Using renewable energy resources
Contributing to global warming