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Business growth
Fichas del conjunto (16)
- 1What are 7 reasons why firms want to grow?1) Increase in market share
2) Benefit from greater profits
3) Increase sales
4) Increase economies of scale
5) Gain power
6) Satisfy managerial ambitions
7) Gain expertise - 2What is the divorce of ownership from control?The idea that shareholders in a public limited company cannot exercise day-to-day control over the decisions of managers
- 3What is the principal agent problem?A problem arising from conflict between the objectives of the principals those of the agents who make decisions on their behalf.
- 4What is a good example of the principal-argent problem ending badly in recent times?CEO Antony Jenkins was fired from Barclays bank in 2015 because he refused to cut costs and so was not producing the profits that the shareholders wanted
- 5How does the use of profits differ in a public sector company and a private sector company?In the public sector, the profits will all be reinvested into the company whereas the profits in the private sector will be used to meet the demands of shareholders.
- 6What are the two main ways that a business can grow?Organic/Internal growth - through capital investments
External growth - through mergers, amalgamations or takeovers - 7Name 3 advantages and 2 disadvantages of organic growth1) Less risky and easier to avoid mistakes as it's very gradual
2) Managers retain control
3) Creates jobs
1) Very slow growth
2) Only possible with access to credit or substantial profits
- 8Name 3 advantages and 3 disadvantages of forward vertical integration1) Certain way of selling your products
2) Can prevent the sale of rival products
3) Can absorb profits of next stage of production
1) May not have the expertise in next area
2) Less choice and higher prices for consumers
3) Could be investigated by competition authorities
- 9Name 4 advantages and 2 disadvantages of forward vertical integration1) Guaranteed supply of goods
2) Absorb the profits
3) Can restrict raw material supply to rivals
4) Reduces cost of production
1) Anti-Competitive if access is restricted
2) Insufficient expertise
- 10Name 3 advantages and 3 disadvantages of horizontal integration1) Firms gain market share and monopoly power
2) Gain from economies of scale
3) Reduced average costs due to fixed costs being spread across more output
1) Competition authorities could block merger
2) Could have diseconomies of scale
3) More likely to be seen by workers as hostile as jobs are lost
- 11Name 2 advantages and 2 disadvantages of a conglomerate merger1) Diversify product range
2) Potential for unlimited growth
1) Higher LRAC
2) Huge diseconomies of scale when managing people in many different industries - 12What are the 4 main constraints on growth?1) Size of the market
2) Access to finance
3) Owner Objectives
4) Regulation
- 13What is a niche market?A focused, targetable portion of a market, a narrowly defined group of potential customers
- 14Give 4 benefits of remaining a small business1) Can focus on quality and innovation
2) Can avoid diseconomies of scale
3) Higher profit margins
4) More flexible
- 15Give 4 disadvantages of remaining a small business1) Harder to access credit
2) Unlikely to gain from economies of scale so have higher production costs
3) Growth is limited in small markets
4) Business nepotism is more likely.
- 16What are 3 reasons for a demerger?1) Lack of synergies
2) Price of the firm when divided might be more valuable than the firm together
3) To become more 'focussed'
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- Descripción
- A level (Unit 3) Economics Fichas sobre Business growth , creado por Sophie Knight el 17/02/2017.
- Creado por
- Sophie Knight
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