U2-1 Business Growth

jadepalmer98
Mind Map by , created about 6 years ago

GCSE Business Studies (Unit 2 (Growing a business)) Mind Map on U2-1 Business Growth, created by jadepalmer98 on 10/18/2013.

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jadepalmer98
Created by jadepalmer98 about 6 years ago
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U2-1 Business Growth
1 Reasons to expand
1.1 Economies of scale

Annotations:

  • Cheaper to buy in bulk - six pack of beans = £1.50, single can = 50p
  • The more staff in one office, the less rent, light and heat paid per person
1.2 Diversification

Annotations:

  • Moving into different areas - EasyJet started as just flights, now sells holiday packages and car rental
1.2.1 Increases market share

Annotations:

  • Retailers will be more likely to stock products
1.3 Financial Support

Annotations:

  • Good credit history so bigger loan for expansion
1.4 Personal Vanity/Ambition
1.5 Domination of the market
2 Reasons not to expand
2.1 To keep control

Annotations:

  • Have to hire more managers if larger so won't be able to control all aspects of the business
2.2 To offer a personal service to customers
2.2.1 Lost when a business grows
2.3 To avoid high risk

Annotations:

  • Putting more money into the business increases risk as the is more money to be lost
2.4 To avoid increased worry and workload

Annotations:

  • You will also have less personal time when you expand as there is more work to be done
3 How can businesses grow?
3.1 Internal Growth
3.1.1 Business grows through retained profit
3.2 External Growth
3.2.1 Financed through loans
3.2.2 Joins = Merger

Annotations:

  • T-Mobile + Orange = EE PC World + Currys = Currys PC World
3.2.2.1 2 businesses agree to become 1
3.2.3 Buys = Acquisition

Annotations:

  • Hewlett Packard bought Compaq
4 For chain of production see separate mindmap

Attachments:

5 Causes of internal growth
5.1 Acquisition of more stock/staff
5.2 Gaining a good reputation
5.3 Retained profit
5.4 Firms ability to produce more....

Annotations:

  • Firms ability to produce more of its current products to sell in its existing markets, and increasing market share
5.5 Sell current products into new markets

Annotations:

  • Aim at different market segments/countries
5.6 Launch new product
5.6.1 Diversification
5.7 AKA Organic Growth
5.8 Benefits and drawbacks

Annotations:

  • Benefits - Relatively inexpensive - not taking out large loans, mostly funded by retained profit - natural expansion - specialising in their way of being successful Drawbacks - Uses up savings which might be needed
6 Expanding abroad
6.1 Benefits

Annotations:

  • - Reach a new market so increase market share - Reduced taxation levels - More well known - Cheaper labour - no minimum wage - Possibility to launch more seasonal products - Cheaper premises - Possible government grants - Employment and Health & Safety laws less rigorous
6.2 Drawbacks

Annotations:

  • - Lose control as new manager would be needed - Expensive to launch new shops and ship equipment etc - High risks as product might not sell - Have to promote and advertise more as less well known - Language barriers - Travel and accommodation expenditure for employees - Staffing issues - Products may need modification for a new climate and clients - Different legal system

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