Name: Class: Date Taken: Total Possible Marks: 33 Business Growth Basics Complete the following questions in the time allowed by your teacher QUICK DEFINITIONS Write a short, accurate definition for each of the following key terms. ( marks for each good quality definition) 1. Define: organic growth. Define: external growth 3. Define: acquisition. Define: joint venture 5. Define: horizontal integration 6. Define: vertical integration www.tutoru.net - 1 -
- - QUICK LISTS In this section, provide an outline or list points which answer the question 7. List five ways in which the size of a business can be measured 5 A. B. C. D. E. F. G. H. 8. Outline one advantage and disadvantage of a business focusing on internal rather than external growth A. B. C. D. 9. List three possible examples of horizontal integration A. B. C. D. E. www.tutoru.net - -
- 3 - Short Answers In this section, write a short answer (one or two sentences) for each question. 10. Give two reasons why you might not be able to use the same measure to compare the size of two businesses 11. An acquisition or takeover of one business by another is often said to be a risky decision. Give two reasons why this might be the case www.tutoru.net - 3 -
Name: Class: Date Taken: Total Possible Marks: 33 Business Growth Basics Complete the following questions in the time allowed by your teacher QUICK DEFINITIONS Write a short, accurate definition for each of the following key terms. ( marks for each good quality definition) 1. Define: organic growth Growth that arises from the sales of existing products and from the development of new products by the firm. These can be into existing or new markets.. Define: external growth Growth that occurs when a firm buys another business and adds that business to its overall operation 3. Define: acquisition An acquisition is the purchase of one business by another. E.g. Kraft Foods acquiring (buying) Cadbury plc in 010. Define: joint venture A joint venture occurs when two or more businesses agree to run a separate business or project together. Often the joint venture will be a new company in which the joint venture partners invest 5. Define: horizontal integration When two businesses at the same stage of the production process in the same industry are brought together - e.g. a travel agent buys another travel agent 6. Define: vertical integration When two businesses in the same industry but at different stages in the production process join together. E.g. a book publisher buys a printing business specialising in printing books www.tutoru.net - 1 -
- - QUICK LISTS In this section, provide an outline or list points which answer the question 7. 5 List five ways in which the size of a business can be measured A. Sales or revenues B. Profits C. Business value (market capitalisation) D. Capital employed in the business E. Number of employees F. Output (how much it produces) G. Number of outlets H. Market share 8. Outline one advantage and disadvantage of a business focusing on internal rather than external growth A. Advantage: less risk - the firm concentrates on growing sales of products it knows well B. Advantage: lower investment - growth may be possible simply from the existing investment in capacity C. Disadvantage: growth may be slow - particularly if the business operates in mature or declining markets D. Disadvantage: the business may become over-reliant on sales and profits from a small number of markets, products and customers 9. List three possible examples of horizontal integration A. A clothing retailer buys a high street competitor B. A UK hotel chain buys some hotels in Spain C. An insurance company buys some other insurance brands from a bank D. A travel website buys an online travel product retailer E. A hairdressing salon acquires two salons in nearby towns www.tutoru.net - -
- 3 - Short Answers In this section, write a short answer (one or two sentences) for each question. 10. Give two reasons why you might not be able to use the same measure to compare the size of two businesses Valid points include: Firms differ in the sales that they are able to achieve (size of market they operate in) One firm may exist to earn profits whereas the other might be a social enterprise 11. An acquisition or takeover of one business by another is often said to be a risky decision. Give two reasons why this might be the case Valid points include: Acquiring firm may not have any experience of the market in which the target operates The price for buying the business may be too high, which makes it harder to earn a return on investment The business being bought may be hard to integrate successfully - e.g. to a clash of cultures The acquisition may distract management from running their existing business www.tutoru.net - 3 -