business expansion

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business expansion
2011-11-08 13:12:32

chapter 18
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  1. what is organic growth?
    natural, slow expansion of the business
  2. organic expansion
    • >increase sales
    • >franchising
  3. what is franchising?
    when the original owner grants permission to other entrepreneurs to copy his idea exactly and set up an identical business to his, in return for a fee
  4. what is inorganic growth?
    quick expansion of a business achieved by merging with taking over or forming a strategic alliance with another business
  5. what is a strategic alliance?/
    two businesses agree to co-operate with each other on a single business project but still remain two seperate businesses... joint venture e.g.disney and mcdonalds
  6. what is a merger?
    two seperate businesses voluntarily agree to join together permanently to form one larger business... amalgamation life and irish permanent formed irish life and permanent plc
  7. what is a takeover?
    when one business takes control of another by buying it outright, with or without its consent... acquisition e.g.meteor and eircom
  8. psychological reasons for expansion
    • >ambition
    • >challenge
  9. defensive reasons for expansion
    • >economies of scale
    • >to protect supplies
    • >to protect distribution e.g. coke and BK
    • >diversification e.g. gillete and parker pens
  10. offensive reasons for expansion
    • >eliminate competition e.g. ryanair aer lingus
    • > asset stripping (no intention of running business)
    • >to acquire new products e.g. ideas, products, staff
    • >to increase profits
  11. long term sources of finance
    • >equity caital
    • >debt capital
    • > retained savings
  12. contrast debt and equity
    • >equity.. few loans..few repayments..less chance of going bankrupt
    • debt.. lots of loans..higher chance of going bankrupt

    • >equity.. permanent source of finance.. does not have to repay capital until business closes down
    • debt.. must repay in full on a particular date in future

    • >equity.. does not have to pay dividends.. directors choice
    • debt.. must pay interest whether making profit or not

    • >equity..does not have to provide security
    • debt.. security needed so risk losing assets if cannot repay

    • >equity.. dividends not tax deductable
    • debt.. interest tax deductable.. so pays less tax

    • >equity.. selling shares.. lose control
    • debt.. does not effect control
  13. factors to consider when choosing finance for expansion
    • >cost
    • >security
    • >tax implications
    • >control
  14. list things affected by business expansion
    • >share price
    • >products
    • >management
    • >finances
    • >supplies
    • >profits
    • >employees
    • >customers
  15. importance of irish business expanding in ireland
    • >more taxes (corporation)... improved infrastructure
    • >less unemployment
    • >spin off effect
    • >if charge low price.. lower cost of living
  16. importance of irish business expanding abroad
    • >increased sales abroad.. increase in employment here
    • >exporting goods improves balance of payments
    • >exporting bring foreign currency into ireland
    • >exporting impoves our international relations