IGCSE Business Studies Term 1

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Presentation transcript:

IGCSE Business Studies Term 1 Business growth and Measurement of size

HOMEWORK ... The Sectors and Grammar ... What Sector is Grammar a part of? List in your books how the other sectors play a part in the running of the school! What does the school rely on happening in order for it to run smoothly?

Measuring a business ... How can you measure a business? Who interested in the size of a company? Key Term: Stakeholders (people who have an interest in a business)

Some problems with measuring size ! If 2 companies sell 1,000 cars, are they the same size? Will they make the same revenue? But it depends on the industry! Fast Food restaurants sell similar foods, so can be compared by output!

Some problems with measuring size ! The amount of employees in each company ... Can you judge the “size” of a business by looking at these?

Some problems with measuring size ! Should we measure by ...

How do firms grow? They can grow ... internally - organic growth (SLOW) externally – merger or takeover (QUICK)

Key Terms ... Labour intensive Capital intensive Remind me ... Why shouldn’t profit be used to measure the size of a business? So, what does profit depend on?

EXTERNAL GROWTH ... How? Takeover (acquisition) – complete control from another Co Merger – mutual – either a new business or staying separate “Horizontal” Merger – same good/product same stage of production “Vertical” Merger - same good/product different stage of production

EXTERNAL GROWTH ... How? Lateral Merger – “related” goods, but not in direct competition can help reduce costs for a business buy buying the “support” product Conglomerate – “diversifying” completely unrelated products/goods/services Why might becoming a conglomerate be considered a sound strategic move by a business?

Task ... Figure 3.2 on page 23 ... DO NOT COPY THIS OUT !!! I want you to copy the layout of it, but relate it to “Chocolate manufacturer A” Activity 3.2 - list in your books the type of merger you think was involved

Starter ... What type of merger? National newspaper buying a paper mill in Canada Printing firm in Mount Eden going into partnership with Printing Parnell Furniture manufacturer buying a chain of high street furniture stores STX Group buying shipbuilding and energy companies Computer software developer taking over an internet services provider

WHY do companies grow? Increase Sales Increase Market Share Increased demand for the product (they need to expand!) Increases status (manager aims) What disadvantage are there for companies to grow too fast?

Economies of Scale – types of ... “Advantages for a business who grow” EoS explained Technical Economies Managerial economies Trade Economies (Purchasing) Financial Economies Overall objective of each of the above? To reduce the Average Cost per unit through growth!

Diseconomies ... What is it? “Disadvantages for a business who grow too large” (org chart reminder!) Difficult to control (poor management) Increase in costs for managers to help control Becomes inflexible – Bureaucracy (red tape) Reduced staff motivation (don’t feel part of team) Communication slows down Decision making takes longer Draw Figure 3.4 in books ...

How do they manage to survive? small FIRMS How do they manage to survive? They value their independence – they don’t want to be taken over by a large organisation and lose control They might serve a smaller market (like in NZ) Specialisation (Yacht building) Creativity can grow (aiding development) Supporting the larger firms Quick decision making – can respond to changes quickly

Exemplar Exam Question ... Page 26 – top activity ... (8 marks) ... How will you tackle this question? What type of merger will it be? Will it be hostile or friendly? Explain you reasons Give one type of economy of scale that could benefit them – APPLY it to the case study (glass and windows) Tell me about cost and selling price What other benefits exist for the business?