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2.1 Building a business, Becoming a PLC takes time and money. - Coggle…

- - - - Growth can be slow.
      - May miss out on economies of scale (e.g. bulk discounts).
      - Limited access to finance.
- - - - Reduces production costs by removing the middleman.
      - Gives greater control over the supply chain and product quality.
      - Reduces the risk of supply shortages.
      - Forward integration increases profits and brand visibility.
    - - May duplicate employee and management roles.
      - Possible culture clash between the businesses.
      - Lack of expertise in the new area may cause inefficiencies.
      - The cost of buying the business may take a long time to recover.
  - - - Quickly increases market share.
      - Reduces competition.
      - Lowers unit costs through bulk buying (economies of scale).
      - Existing industry knowledge makes success more likely.
    - - May duplicate management and employee roles.
      - Possible culture clash between the businesses.
      - Unit costs may increase due to inefficiencies.
- - - - Can raise large amounts of money by selling shares.
      - Often cheaper than borrowing from banks.
    - - Ownership is spread across many shareholders.
      - Reduces financial risk for each owner.
    - - Shares are easier to buy and sell.
      - Can increase the value of the company’s shares.
    - - Board of directors provides extra expertise.
      - Better decisions through different perspectives.
    - - Increases the company’s reputation and visibility.
      - Helps attract more customers and investors.
  - - - Must follow strict legal and financial rules.
      - Preparing reports and holding meetings increases costs.
    - - Shareholders have a say in how the business is run.
      - Founders may lose control over decisions.
    - - Pressure to make consistent profits for shareholders.
      - Managers may focus on short-term profits over long-term success.
    - - Competitors can buy enough shares to take control.
      - The business could be taken over without management’s approval.
- - - - Usually free (no interest or loan charges).
      - No outside influence over business decisions.
      - Quick and easy to access.
      - Available even if the business cannot get a bank loan.
    - - Has an opportunity cost (money cannot be used elsewhere).
      - May not provide enough money for the business.
      - Usually less tax-efficient than some external finance methods.
  - - - Advantages
        
        Large sums of money can be borrowed.
        
        Fixed repayments make budgeting easier.
      - Disadvantages
        
        Interest must be paid.
        
        Business assets may be at risk if repayments are missed.
      - Share capital
        
        Advantages
        
        Can raise large amounts of finance quickly.
        
        Shareholders may bring valuable skills and experience.
        
        Disadvantages
        
        Shareholders receive a share of profits (dividends).
        
        Owners lose some control as shareholders can vote on business decisions.
- - - - Uber and Lyft were initially focused on capturing the largest share of the ride-hailing market (market share)
      - As competition intensified, both companies shifted their focus to profitability, and their objectives changed accordingly (profit maximisation)
      - Market conditions such as competition, demand, and changing consumer price sensitivity can have a significant impact on a business's aims and objectives
  - - - A company may need to shift its focus to comply with new regulations or capitalise on new opportunities created by changes in legislation
      - With the passage of the Affordable Care Act in the USA in 2014, healthcare providers had to adjust their aims and objectives to comply with new regulations and take advantage of new opportunities created by the law
      - Internal reasons
        
        Factors such as changes in management or the company culture can also influence a business's aims and objectives
        
        In 2014 Microsoft appointed Satya Nadella as the company's CEO
        
        He shifted the company's focus from software to cloud services and the company's objectives changed accordingly
- - - - Businesses need skilled and available workers.
      - Lower labour costs can reduce expenses.
      - Infrastructure
        
        Good roads, ports, and internet improve efficiency.
        
        Makes transport and communication easier.
        
        Trade bloc
        
        Reduces tariffs and trade barriers.
        
        Makes exporting to member countries easier.
        
        Return on investment (ROI)
        
        Businesses want the investment to be profitable.
        
        Higher expected returns make a location more attractive.
        
        Natural resources
        
        Being close to raw materials reduces transport costs.
        
        Ensures a reliable supply for production.
        
        Political stability
        
        Stable countries have lower business risk.
        
        Reduces the chance of disruption to production.
        
        Ease of doing business
        
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  - - - Gain access to cheaper labour and raw materials.
      - Create jobs and boost the local economy.
      - Invest in infrastructure (e.g. roads, electricity, water).
      - Pay taxes that can fund local services.
      - Support local communities through charitable projects.
    - - Can damage the environment and local habitats.
      - May leave abandoned factories or sites when they leave the country.
- - - - Used to protect domestic businesses from foreign competition.
      - Advantages of tariffs
        
        Protects new (infant) industries from foreign competition.
        
        Increases government tax revenue.
        
        Reduces dumping (selling below market price).
        
        Disadvantages of tariffs
        
        Increases the cost of imported raw materials and goods.
        
        Reduces competition, so businesses may become less efficient.
        
        Reduces consumer choice as imports become more expensive.
      - A tariff is a tax on imported goods.
  - - - A group of countries that reduces or removes trade barriers between members.
      - Makes trade easier by allowing the free movement of goods (and sometimes people).
      - Benefits of being in a trade bloc
        
        Access to larger markets with more customers.
        
        Protected from outside competition by external tariffs.
        
        May receive government or infrastructure support.
        
        Free movement of labour provides a larger workforce and can reduce labour costs.
        
        Drawbacks of being in a trade bloc
        
        Increased competition from businesses in other member countries.
        
        Businesses must follow common rules and regulations.
        
        Countries outside the bloc may retaliate with their own tariffs.
        
        Less competition from outside the bloc may make businesses less efficient.