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Worksheetsexpansion leaving cert business
Total questions: 60
Worksheet time: 29mins
The three main reasons for an entrepreneur expanding their business are
Offensive
Psychological
Preservative
Defensive
An example of a psychological reasons is
Increasing profits
Challenge
Asset stripping
Protecting supplies
An example of an offensive (aggressive) reason for expansion is
Ambition
To acquire new products
Diversification
Ambition
An example of a defensive reason for expanding a business is
Diversification
Challenge
Increasing profits
Eliminating competition
Eliminating competition is a
Defensive reason
Offensive (aggressive) reason
Psychological reason
Protecting supplies is a
Psychological reason
Defensive reason
Aggressive reason
Diversification means
Achieving economies of scale
Entering new markets to reduce risk of being dependent on one
Buying a company purely to gain certain assets
Eliminating competition
Backward vertical integration means
Expanding by buying the supplier of raw materials
Expanding by buying the seller of your products
Economies of scale means
Saving money by setting up lower wage economies
Making cost savings by increasing the numbers of products produced
Saving money by budgeting to reduce costs
Two businesses working together but remaining as two separate legal entities is
a merger
a takeover
a strategic alliance
a franchise
True or False. A takeover is an organic method of expansion
True
False
Increasing profits, franchising and licensing are examples of
Organic expansion
Inorganic expansion
Psychological expansion
Agressive expansion
Debentures are an example of
debt capital
equity capital
True or false - issuing shares (equity capital) has no effect on who controls the business
True
False
Tend to experience economies of scale
Small Businesses
Large Businesses
Physical expansion or opening other outlets
Internal growth
External growth
Where two or more companies join to form a new company
Internal growth
External growth
Expanding the product line
Internal growth
External growth
Two or more businesses pooling their resources to achieve a goal:
Joint Ventures
Mergers
Acquisitions
Franchising
Sandals hotel and West Indies Cricket Board coming together to promote the Caribbean
Joint Venture
Merger
Acquisition
Franchising
Two or more companies coming together to form a new company
Joint Ventures
Mergers
Acquisitions
Franchising
Two or more companies coming together to form a new company
Joint Ventures
Mergers
Acquisitions
Franchising
Where one firm take controlling interest of another firm:
Joint Ventures
Mergers
Acquisitions
Franchising
A business grants the licence to use its brand and reproduce its product.
Joint Ventures
Mergers
Acquisitions
Franchising
EXXON AND MOBIL joining to form EXXON-MOBIL
Joint Ventures
Mergers
Acquisitions
Franchising
Economies of scale are gained when a business...
decreases it's production and causes an increase in average production costs
increases it's production and causes a decrease in average production costs
maintains production levels and causes an increase in average production costs
increases it's production and causes an increase in average production costs
Which of the following EOS refers to improving the production process?
Financial
Managerial
Technical
Purchasing
Diseconomies of scale occurs when a business...
grows larger and manages their operations effectively.
becomes too large to run effectively and efficiently.
grows slowly and maintains growth.
becomes very large but still manages to run effectively.
'Bulk buying' refers to which EOS?
Financial
Technical
Purchasing
Managerial
Which of the following is an advantage of financial EOS?
Paying suppliers higher prices
Lower interest rates for loans
Paying dividends to shareholders
Repeat purchases from loyal customers
Internal growth is also known as
Merger
Sales maximisation
Organic growth
Inorganic growth
External growth is also known as
Organic growth
Inorganic growth
Merger
Sales maximisation
An example of Organic growth is
Merger
Launching new products
Acquisition
Takeover
The possible benefits of growing the business are
Keeping control over decision making
Larger potential profits
Benefit from bulk buying discounts
Security for the future of the business
A merger is
Two business agreeing to becoming one new business
One business buying shares in another business
One business taking over control of another business
Two businesses co operating with each other.
The disadvantages of Organic growth are
There is little or no risk in growing slowly
This is a very high risk strategy, opening lots of stores or taking on new staff is very risky
Long period between investment and return on investment
Growth may be limited and is dependent on reliability of sales forecasts
Advantages of a Merger might be
Better deals because of increased order size, bulk-buying discounts etc.
Increased revenue and market share. Increased size of the combined company increases market power and ability to set higher prices
To gain resources. If one company has resources (e.g. technology) that another one wants then a merger may be the most cost effective way to get access to those resources
Slow growth so can be easily managed
Disadvantages of Mergers could be
Clash of Cultures. All businesses have a slightly different culture and they may not work well together
Mergers lead to bigger more efficient business
Possible communication problems. As the business gets bigger, or if there are now too many employees
Unreliable partners. A good merger will depend on trust between the businesses
Which option best describes the term takeover?
When two firms agree to join together to make one new business
When a business finds a new market in another country
When one business purchases another business
When a business brings something new to the market
Which best describes growth by expanding overseas? When a business:
Finds new customers to buy its products in its domestic market
Purchases another business in its home country
Finds a new market in another country
Invests heavily in research and development
Which two are examples of organic growth?
When two businesses agree to join together
When a business expands overseas
When a business acquires a controlling interest in another business
When one business buys another business
When a business launches a new product
Why might a business want to grow?
More Profit
Give employees more time off
To improve the business image
To sell less products
Why might a business want to grow?
To gain more competition
To gain more customers
To reduce the amount of stores
Franchising is a method of ____________ growth
Internal
External
Internal/Organic growth is easier to manage and control than External/Inorganic.
True
False
Which of the following is NOT Internal/organic growth?
Opening a new location
Expanding through internet selling
Merging with a similar company
Offering franchises
A merger is...
A method of Internal growth
A friendly deal where two businesses join together
A forced and sometimes hostile deal where one firm buys a share of the other business
A take-over is...
A method of Internal growth
A friendly deal where two businesses join together
A forced and sometimes hostile deal where one firm buys a share of the other business
What is an advantage of an overdraft?
There is never interest
You can pay in smaller installments
Useful for relatively small sums and short term finance
You don't have to pay it back
Which of these facts about venture capitalists is NOT true?
Venture capitalists tend to operate in fairly risky markets
Venture capitalists would be paid a share of the profits
Venture capitalists usually provide money only and have no interest in running the business
Venture capitalists usually invest large sums of money
An amount of money that is paid back within an agreed amount of time, with interest
Bank loan
Angel investment
Overdraft
Retained profit
When two or more firms join together to create a new company is
an acquisition
a merger
a franchise
a vertical merger
