IB Exam Preparation IB Business & Management

Do Now... (2 minutes) Write in your notebook what it means for a business to “grow.” Write three ways in which a business can grow.

Growth: Do Now Debrief (3 min) When considering growth, think of an increase in revenues. OR an increase in market share. How did you define growth? Do your examples fit with this definition? What examples of growth did you write?

Internal Growth Mini-lesson on content (< 5 min.) Turn to page 9 of your Unit 1 Review Packet Part C. Internal/organic growth. Part D. External growth.

Internal Growth Business uses its own resources to grow (i.e., increase market share/raise revenue) such as: retained profits borrowing issuance of shares It can grow by: changing prices effective promotion improving products increasing distribution network expanding to new locations staff training and development to increase customer loyalty and lead to higher sales

External Growth Occurs through dealings with outside organizations, usually through: Mergers Takeovers (aka “Acquisitions”) Joint ventures Strategic Alliances Pooling the financial resources of another company as well as its other assets (customer base, knowledge of industry, technological capabilities, etc.) allows the business to achieve its growth objectives.

Internal vs. External Main differences are: How the growth is financed Internal: own resources External: resources of another business How the growth is achieved Internal: improved marketing, expanding locations, changing prices, improving customer service External: acquiring the assets of another company (including their customer base)

Mergers & Takeovers Mergers: two firms agree to completely combine into a new company Takeovers (aka “Acquisitions”): one company buys a controlling interest in another company Pros: greater market share; benefit from economies of scale; synergy; diversified product mix Cons: loss of control; culture clash; redundancies; conflict; diseconomies of scale; regulatory problems.

JVs and Strategic Alliances Joint Venture: two companies set up third, new company, to accomplish their growth objectives. Strategic Alliance: two companies work together to achieve growth objectives, but remain separate, independent companies. Pros: same pros as mergers, plus relatively cheap, allows exploitation of local knowledge, and has high success rate Cons: requires reliance on partners, potential dilution of brands, possible organizational culture clash

The Imperial Case Study (Class discussion of concept and high-level question, using the Imperial) - 5 min Option 3: Read lines 150 to 160 in the Imperial Case Study. Evaluate the relative merits of Option 3 (forming a strategic alliance) as a method of achieving Martin’s objectives.

The Imperial Case Study Evaluate the relative merits of Option 3 (forming a strategic alliance) as a method of achieving Martin’s objectives. What do we notice about this question? How do we respond to an “evaluate” question? How many marks would it likely be worth?

Model Response Evaluate the relative merits of Option 3 (forming a strategic alliance) as a method of achieving Martin’s objectives. Introduction Explanation of key terms, demonstrating understanding Balanced Analysis, with explicit references to case Includes judgments/conclusions supported by analysis Uses appropriate terminology throughout

Individual Check for Understanding (Approx. 5 minutes) McDonald’s, in seeking to increase its market share in Japan, entered into a strategic alliance with Toys R Us, whereby McDonald’s and Toys R Us agreed that Toys R Us would house McDonald’s restaurants within its stores. With reference to the case study, explain the difference between internal and external growth and evaluate for McDonald’s decision to enter a strategic alliance as a method of achieving its growth objective.

Individual Check for Understanding (Approx. 5 minutes) - ANSWER Growth is categorized as “internal” or “external” depending upon the source of the funding for the growth as well as the strategies employed for achieving that growth. Internal growth involves the use of a company’s own resources to achieve its growth objectives. Such resources include retained profits, borrowing money, or issuing shares. These resources can then fund strategies or investments within the company that can lead growth. Evaluation of SA: intro, define growth & SA, pros of SA (with reference to case study), cons of SA (with reference to case study), recommendation with justification. (you will walk them through main points in your eval.)