Starter task: What does ‘innovation’ and ‘diversification’ mean?
Changing business aims and objectives II – Going international GCSE Business studies Unit 2 Topic 6
Learning objectives £I can discuss what ‘being an International company’ might involve? ££Am I able to identify the benefits of becoming an International company? £££Can I evaluate how a firm might gain more market share by going International?
Recap from last lesson What is innovation? What is diversification?
Innovation Innovation is where a firm is constantly trying to improve and develop its range of products, staying at the forefront of fashion, trends and technology For example, in industries such as computers, new products are being developed every few weeks.
Diversification Diversification occurs when a firm moves into a new market. For example Mars produces chocolate such as mars bars but also make pet food (Pedigree chum). If there are problems in one market they could be offset by gains in another.
Do you remember the fizz & burp drinks co.? Lets get in my time machine and have a look at what they are up to now…
The year is 2015… Fizz & burp drinks co. have been a huge success & now have a 23% stake in the very competitive UK market
A very rich Robin Banks is looking to grow his company even further, but despite spending huge amounts of money promoting his products, Robin does not seem to be able to increase his sales in a saturated UK market. One of Robins managers has recommended that he consider expanding the business abroad.
What are the benefits of Fizz & burp going international? Stretch & Challenge: are there any disadvantages to what you are recommending?
Mr Goodacre’s ideas Additional potential customers Other countries markets may be growing Offers growth when further expansion in the UK market becomes problematic (e.g. Tesco monopoly on supermarkets) It may reduce risks. If there are problems in one country you can still rely on sales from another country
Using data Robins manager has also estimated that by ‘going international’, Fizz & burp could have a growth rate of 25% But what does ‘growth rate’ mean and how do you calculate it?
‘Growth rate’ looks at the rate that sales are growing. Let me explain…
Imagine a business had sales of £200,000 and this increases to £250,000. To find the growth rate we use: The change in valueX 100 The original value In this case: (£250,000 - £200,000)X 100 £200,000 = £50,000X 100 £200,000 = 25% What would be the growth rate if sales increased from £250,000 to £300,000?
Individual task You are to write a memo to Robin advising him on the possibility of Fizz & burp ‘going international’ Ensure you consider the pros and cons Calculate the potential growth rate if sales could go from £450,000 to £625,000 Ensure you tell him your judgment whether or not it is a good idea