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Business Unit 2 Revision Notes

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Umar Farooq

on 19 April 2013

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Transcript of Business Unit 2 Revision Notes

Growing a Business Unit 2 Unit 2 Notes Expanding a Business Reasons for a business to expand Reasons for a business not to expand To increase sales.

To increase market share.

Take advantage of Economies of scale.

Become more secure and benefit from some customers preferring to deal with large businesses. Keep control over most parts of the business.

To offer a personal service to customers.

To avoid too much risk.

To avoid increased worry and workload. Method of Expansion There are 2 ways in which any business can use to expand.
Organic Growth
Inorganic or External growth
Organic growth is expansion from within a business e.g. by opening more shop branches. However Inorganic growth is expansion by merging with or taking over another business. Advantages & Disadvantages for opening new branches Advantages Slow and steady- organic growth is less risky than taking over or merging with another business.
Often paid for from the profits i.e. it doesn't need of any shares or a loan being take out as the expansion is from profits.
It is easier to control and manage as if the business merges or takes over another (inorganic) the sudden expansion can be hard to control and handle. However organic growth is slow and can be correctly with decisions being made by managers considering the benefits and drawbacks of a certain decision. Disadvantages Too slow for some owners as it can take up to several years to double the size of a business, however a merger or takeover can achieve this over night.
Market share could fall if other businesses are also expanding more quickly resulting in market share falling.
There are no gains from integrating with another business. Inorganic Growth There are 4 different types of integration, depending on whether the other business is in the same industry or the same stage of production. Vertical Backward
e.g. building firms takes over brickwork's Vertical Forward - towards a customer, e.g. farmer buys food shop Horizontal integration
e.g. between two shops Diversification
e.g. between steel company and food retailer Business Aims & Objectives Business aim and objectives A business aim is a long term overall goal of a business
e.g. a mission and sense of feeling and direction for a business.

Objectives are short term steps or targets to achieve the business aims.
E.g. an aim is to survive in the first year.
The objective would be to sell 1000 units in 6months. Smart Objectives An objective can be created by using a smart objective, which is an objective that has certain elements to the objective. An example would be "All year 11 Business students will be achieving or exceeding their target by the end f the year Product Life Cycle Product Life Cycle The Product Life Cycle is the life span of a product, recording in sales from launch to being taken off the market. This consists of 4 stages:
Launch - sales may start slowly as consumers get to know the product.
Growth - sales accelerate if it is well advertised and if the consumers like it.
Maturity/Saturation - sales level off as competitors enter the market or tastes change.
Decline - Sales fall as it becomes less popular. It may eventually be taken off the market. Factors influencing
the price a business charges Target market Cost to Business Profit Margin Tax (%) VAT Fixed Price Economic Conditions Location Manufactured Competitors price Stereotype Supply Chain New Product - High/Low Price Organisational Structures What are organisational structures?
An organisational structure is how a certain business is structured and run e.g. a Sole Trader or a Franchise. Also the structure within the buisness ie CEO, Shareholders, Managers and Employees. It is the control of the business like a Hierarchy.

They are important because they establish who has authority and responsibility in a business and allows it to be constructed and distributed properly. Also so the business knows what they are doing and enable decision making and communications. Motivation Motivated workers be enthusiastic and offer ideas, also offering better customer service which increases sales. They also arrive early and work hard increasing productivity. Motivated workers are loyal and reduce labour turnover costs.

However non motivated workers have high rates of absenteeism and produce fewer products. They are slow to react to requests from management and are careless creating more accidents. These workers do not stay long, resulting in high staff turnover and they arrive both late and produce poor quality products or services.
A Business can use both financial and non financial methods to motivate staff. Financial Benefits Non Financial Benefits Bonuses
Company Car
Health Insurance
Company Pension
Staff Discount
Good Pay Praise
Job Security
Promotion opportunities
Working in a Team Induction Training Initial training when a new member of staff starts work:
Tour of the premises
Business organisation (history; performance; structure; policies)
Business’s aims and objectives
Meeting the team
Learning duties of the job
Health and safety training
Length will vary on complexity of jobs; size of business and level of position.
Important so a new member of staff becomes productive as quickly as possible.
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