Organisation, Growth and Location Learning Outcomes To be able to classify a range of businesses accurately. (E) To recognise the reasons why businesses can grow. (C) To be able to analyse the factors affecting a business’s location. (A) Lesson Objective: I can classify a business and analyse the reasons behind success or failure of a business.

Classifying an organisation We can classify an organisation in one of 3 ways. 1.Are they a primary, secondary or tertiary sector organisation. 2.Are they operating in the public or private sector. 3.Are they incorporated or unincorporated. We have already covered 1 & 2 so now lets look at 3

But first………. Define these key terms: – Primary sector – Secondary sector – Tertiary sector – Private sector – Public sector REMINDER: KEY TERMS TEST THURSDAY 17 th OCTOBER EXTENSION: Give an example of a business in each of these sectors.

Unincorporated Businesses Either a sole trader (sometimes called a sole proprietor) or a partnership. This will be covered more next week. The features of an unincorporated business are:- – Unlimited Liability – Income tax is paid on profits – Continuity (business only operates while the owner is alive) – Financial information is private – Liable to Bankruptcy

Incorporated Businesses Either a Private limited company (Ltd) or a Public limited company (Plc). We will cover these in 2 weeks time. Features of an incorporated business are:- – Limited liability – Separate legal identity – Corporation tax is paid on profits – Finance can be raised through shares – Financial information is made public – Liable to insolvency

Incorporated Vs Unincorporated Create a table of as many incorporated and unincorporated businesses as you can think of. INCORPORATEDUNINCORPORATED Now share your answers with the person next to you!!

Success Vs Failure As we have discussed previously, half of all new businesses fail with in the first 3 years. What are the reasons for this failure? Discuss in pairs about the possible reasons for a business failing. Produce a list of your ideas.

Failure!! 1.Poor management 2.No demand for product or service 3.Business is in the wrong location 4.Poor cash flow 5.Costs are too high 6.Too much competition 7.Poor quality product 8.Not enough profit margin 9.Unfavourable exchange rate

What about success? If the business is doing well, then we have the chance to grow and there are 3 main ways we can do this. 1.Merging with another business 2.Taking over another business 3.By internal expansion

Merger A merger takes place when two or more businesses agree to join together to become one larger business. Examples include: – GlaxoWellcome with SmithKline Beecham to become GlaxoSmithKline – AGBarr and Britvic to become Barr Britvic – Cadbury with Schweppes Any more??

Takeovers A takeover occurs when one business takes control of another. This is achieved by buying enough shares in the firm to be able to out vote other shareholders. Examples include:- – Microsoft take over of Skype – Amazon take over of LOVEFiLM Any more??

Internal Expansion This is when the business grows by increasing its production, perhaps by building a new factory or a new shop. This is the route most new businesses will take in the first instance when they are looking to grow.

Activity Complete the missing words worksheet.

Mergers and Takeovers So why might we want to conduct a merger or a takeover? Discuss and see what you can come up with.

Integration The main reason we may conduct a merger or a takeover are to integrate our business in one (or more) direction(s). We have the following types of integration:- 1.Horizontal 2.Backwards Vertical 3.Forwards Vertical 4.Diversification (Conglomerate)

Horizontal Occurs between businesses in the same industry at the same stage of production. This allows economies of large-scale production to be achieved. On the other hand it can lead to reduced choice. Can end up creating a monopoly.

Backwards Vertical When a business merges with or takes over a supplier. For example McDonalds with the supplier of their burger buns. This can lead to less variety in a businesses product range But it can provide the business with complete control of a component or raw material

Forwards Vertical When a business merges with or takes over a business which can provide an outlet for their goods/services. Example: VW buying the Wayside group show rooms to sell their cars. This gives control over final sales and could improve job security. But could increase prices and reduce choice.

Diversification/Conglomerate Merger or take over of an unrelated business. For example if Coca-Cola were to merge with Microsoft. This is good as it spreads risk and reduces the dependency on one product. The problems could be that there is no understanding of the new business activity which could lead to diseconomies of scale.

Activity Match the advantages with the type of integration.

Location Is location important? What do you think? WHY?

What do we need to consider? What will a business need to consider when they decide on their location. Discuss in groups.

Factors Cost Availability of raw materials Access to market Availability of labour Climate/physical geography Transport/Infrastructure Tradition Nature of business product/service Government incentives

Simpson’s location Lets now take a look at the importance of location in Springfield, home of the Simpsons.