Notesale: Turn your study into money

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Why change Aims & Objectives

The aim of a business can
change over time
...


Domination of the market: fewer threats
from competitors and could eliminate rivals

Why Grow?

owners enjoy the power and status that
comes from owning a large business
more likely to get financial support from the
government as they employ lots of people

purchasing economies: buying its supplies
in bulk so cheap unit price

Economies of Scale

marketing economies: cost of advertising
campaign is a fixed cost so they will spend
less per unit advertising its products
technical economies: can afford to operate
more advanced machinery

easier to raise finance
economies of scale

Benefits of Internal Growth

more profit
inexpensive to achieve
less riskier than taking over other
businesses

takes a long time to achieve growth

Disadvantages of Internal
Growth

growth achieved can be dependant on the of
the overall market
hard to build market share if the business is
already the market leader

Takeover is when one business buys
another business
...

Franchising is selling the right to use your
business idea and brand name to other
business
...


rapid growth
higher revenue and profit

Adv
...
of Horizontal
Integration

dis-economies of scale

Forward Vertical integration is a
merger/takeover of a business which is at a
later stage of the chain of production so it’s
the businesses distributer/customer
...


reduces transportation costs
diversification into other markets

Adv
...
of Vertical Integration

dis-economies of scale
regulatory problems

increases brand awareness
royalty payments

Adv
...
of Franchising

can lose control
you don’t get the entire profits earned by
the franchisee

Mainly concerned with the operating costs of
the location, what is costs to produce or
provide goods and services

Supply Factors

costs of the operation

Mainly affect customer service and
revenues
...
of Overseas businesses

Off Shoring

low-wage economies into perspective, the
hourly cost of labour in India and China is
around 5% of the cost of equivalent labour
hours in economies like the UK

Off shoring is where work is
done for a business by others
based overseas, usually where
labour costs are cheaper
...

Minimal paperwork
Disadvantages: unlimited liability
Harder to raise finance

Advantages:Minimal paperwork once
Partnership Agreement set up

Partnerships Adv&Disadv
...
of Product Portfolio

selling a single product may not generate
enough revenue
range can be sold to different segments of
the market

advertising: gain or remind audience
price reduction

Extension Strategies

adding value: new features of product
new packaging

Boston Matrix

A product portfolio is the range
of items sold by a business
...


Price Skimming

Initially charging a high price
then lowering the price

Penetration Pricing

Starting with a low price to
achieve market share, then
raising the price later

Premium Pricing

High price to enhance a
products high quality, luxury
image

Cost Plus Pricing

Price is set by calculating the
full costs of a product and
adding a profit margin

Physiological Pricing

Charging at a price which ends
in 99p is a way of deceiving
people into believing that the
product is cheaper than it really
is

Loss Leader

A product which is sold at, or
below, cost price to attract
customers
...


Direct Marketing

The term that describes a
range of promotional activities
that are aimed directly at the
customer, so bringing the
promotional message straight
tot the target audience
...
g
...


Distribution Channel

Agents

includes retailers, wholesalers,
distributors/sales agents

Sell the products and services
of producers in return for a
commission, percentage of the
sales revenue

Wholesalers

Stock a range of products from
several producers, sell onto
retailers
...
They are the final
link in the chain of distribution
...


advantages:
Larger amounts can be borrowed

Bank Loan

Disadvantages
Less flexible than an overdraft
Have to pay back in stated time or risk
further financial problems

advantages:
Flexibility – can change the amount
borrowed within limits

Overdrafts
Disadvantages
Cannot be used for large borrowing
Rates of interest higher than loans

Profit & Loss Account?

Profit and loss account looks at
all of the things that you have
bought and sold across the
year and takes away all of the
costs you had to pay during
that year
...
Trading Account

Calculates the amount of gross
profit the business makes

2
...
This includes
electric/gas/telephone bills,
staff wages, rent for
warehouse, van hire

3
...


Gross Profit=Gross sales - cost
of goods sold

net profit = operating profit ‒
interest - taxes

operating profit = gross profit ‒
total expenses

cost of goods = opening stock
+ purchases ‒ closing stock

Assets

everything that is owned by a
business which has value

Balance sheet

shows financial position of
assets and liabilities of a
business at specific moment

Liabilities

debts sum of money that is
owed

Liquidity

how easy it is to turn current
asset into cash

Current Assets

cash, cash equivalents,
expected to be turned into cash
during the next year

Depreciation

The reduction in value of fixed
assets belonging to a firm
...
g

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