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WorksheetsBusiness Growth
Total questions: 28
Worksheet time: 14mins
Which of the following is NOT a method of internal (organic) growth?
Increasing output
Gaining new customers
Developing new products
Merging with / taking over another business
Dyson started by selling vacuum cleaners...they now sell hand dryers, washing machines, and fans. Which type of business growth is this an example of?
Internal (organic) growth
External (inorganic) growth
The first Tesco store was built in London. Tesco have since opened stores all accross the UK and in other countries. Which type of business growth is this?
Internal (organic) growth
External (inorganic) growth
Kraft took over Cadbury in 2010. Which type of business growth is this an example of?
Internal (organic) growth
External (inorganic) growth
Some mergers / takeovers in the UK are blocked by the government (CMA Competition and Markets Authority). This is because mergers / takeovers can lead to a lack of choice for consumers. A lack of competition between businesses in a market could lead to...
Lower prices and better customer service
Higher prices and worse customer service
Which of the following is an example of a horizontal merger/takeover?
A chocolate producer buys another chocolate producer
A chocolate producer buys a cocoa farm
A chocolate producer buys a chain of coffee shops
A chocolate producer buys a car producer
Which of the following best describes the term 'diversification'?
To join with a business in the same industry as you
To join with a business that can supply you with raw materials
To join with a business that sells something similar to you
To join with a business in a completely unrelated industry
As businesses grow in size, they usually benefit from 'economies of scale' - what does this mean?
Lower total costs
Lower average costs per unit
Higher total costs
Higher average costs per unit
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 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
Nike buying a materials producer would be a form of...
Vertical Forward Integration
Horizontal Integration
Vertical Backward Integration
Diversification
Which is a franchisor?
Allows others to use their brand and business for a fee
Takes over a business
Buys into an existing brand
Fee paid from franchisee to franchisor based on percentage of sales
royalty fee
Administration fee
advertising fee
Benefits of owning a franchise business
Proven business model
Easier to get financing
Protected territory
All of the Above
Which of the following is true in relation to sources of finance for growing an established businesses?
Selling assets is an external source of finance
Share capital is an external source of finance
Retained profit is an external source of finance
Loan capital is an internal source of finance
Which of the following is a benefit of inorganic growth?
Often easier to manage and control than internal growth
Market share can be increased overnight
Tends to be less expensive than organic growth
Growth is often slow
Which method of growth will most likely reduce the number of businesses that operate in a domestic market?
Expansion overseas
Opening of new stores
Takeover of another business in the home country
Entry into new foreign markets
Which of the following is an advantage to a growing business of changing business ownership and becoming a public limited company?
Owners have unlimited liability
Shares can be sold to the public to raise finance
Financial accounts are published
Shares can only be sold to invited investors
Which of the following best describes the source of finance known as loan capital?
Retained profit is used to reinvest in the business
A business sells unwanted assets to generate funds
A public limited company sells shares in the business
Money is borrowed & paid back, with interest, over a set time period
Which two of the following are internal sources of finance for established businesses?
Stock market flotation
Selling assets
Loan capital
Retained profit
Share capital
Which one of the following is an example of organic growth?
Tesco sells off Giraffe restaurants
Tesco buys established firms
Tesco merges with another supermarket chain
Tesco opens more convenience stores
Which one of the following is an example of a reason to stay small?
Gain diseconomies of scale
Greater flexibility in responding to customer needs
Increase brand recognition
Create barriers to entry
Which one of the following is a barrier to entry?
Internet
Substitue products
Brand loyalty
Market size
These are financial problems with rapid external growth?
expansion can be expensive
takeover can be expensive
additional fixed capital and working capital will be required
all 3 are correct
In which of the following circumstances might a business be experiencing economies of scale?
Falling revenue, increasing unit costs
Increasing revenue, increasing unit costs
Increasing revenue, falling unit costs
Falling revenue, falling unit costs
