1
(ERIFIED PP2)
BUSINESS EDEXCEL PAPER 2 EXAM SET OF
QUESTIONS AND CORRECT ANSWERS ALREADY
GRADED A+ GUARANTEED SUCCESS
Why do business aim and objectives change as businesses evolve?
In response to:
market conditions (A set of variables that dictate how competitive a market is for
businesses.)
- If a business is in a growing market, over time its aims and objectives may
change to focus on growth.
- If a business is in a market where there is suddenly an increase in competition, its
aims and objectives may have to change to focus on survival
Taking advantage of technology
For example, a business could use e-commerce to enable customers to buy
products even if they do not live near its store. New technology may also mean
items are cheaper to produce, so a business might be able to lower prices and target
a lower-income market.
Expanding overseas
Operating in this way could give the business access to a brand new market, which
could prove extremely successful and increase profitability. However, developing
new, unfamiliar markets can be complex and expensive.
What is a public limited company?
, 2
(ERIFIED PP2)
In a PLC, shares are sold to the public on the stock market. People who own shares
are called 'shareholders'. They become part owners of the business and have a
voice in how it operates. A CEO (chief executive officer) and board of directors
manage and oversee the business' activities.
The advantages and disadvantages of PLCs
Advantages of being a PLC include:
the business has the ability to raise additional finance through share capital
the shareholders have limited liability
there are increased negotiation opportunities with suppliers in terms of prices
because larger businesses can achieve economies of scale
The advantages and disadvantages of internal (organic) growth
An advantage of internal growth is that it is low risk:
a business can maintain its own values without interference from stakeholders
higher production means the business can benefit from economies of scale and
lower average costs
A disadvantage of internal growth is that it is slower growth:
there maybe be a long period between investment and return on investment
, 3
(ERIFIED PP2)
growth may be limited and is dependent on the reliability of sales forecasts
Methods of external (inorganic) growth
Merger
A merger occurs when two businesses join to form a new (but larger) business
Takeover
A takeover occurs when an existing business expands by buying more than half the
shares of another business
The four merger and takeover methods
Horizontal integration occurs when two competitors join through a merger or
takeover. The new business then becomes more competitive and increases its
market share. This gives it more control when negotiating and setting prices.
Forward vertical integration occurs when a business takes control with another that
operates at a later stage in the supply chain.
Backward vertical integration occurs when a business takes control of a business
earlier in the supply chain.
Conglomerate integration occurs when businesses in unrelated markets join
through a takeover or merger. This enables businesses to spread their risk over a
wider range of products and services.
The advantages and disadvantages of external (inorganic) growth
, 4
(ERIFIED PP2)
Advantages of external growth include:
competition can be reduced
market share can be increased very quickly overnight
Disadvantages of external growth include:
it can be expensive to takeover/merge with another business
managers may lack the experience to deal with the other businesses
Disadvantages of being a PLC include:
it is expensive to set up, requiring a minimum of £50,000
there are more complex accounting and reporting requirements
there is a greater risk of a hostile takeover by a rival company
Define economies of scale
Economies of scale are the cost advantages that a business can exploit by
expanding their scale of production. The effect of economies of scale is to reduce
the average (unit) costs of production.
(ERIFIED PP2)
BUSINESS EDEXCEL PAPER 2 EXAM SET OF
QUESTIONS AND CORRECT ANSWERS ALREADY
GRADED A+ GUARANTEED SUCCESS
Why do business aim and objectives change as businesses evolve?
In response to:
market conditions (A set of variables that dictate how competitive a market is for
businesses.)
- If a business is in a growing market, over time its aims and objectives may
change to focus on growth.
- If a business is in a market where there is suddenly an increase in competition, its
aims and objectives may have to change to focus on survival
Taking advantage of technology
For example, a business could use e-commerce to enable customers to buy
products even if they do not live near its store. New technology may also mean
items are cheaper to produce, so a business might be able to lower prices and target
a lower-income market.
Expanding overseas
Operating in this way could give the business access to a brand new market, which
could prove extremely successful and increase profitability. However, developing
new, unfamiliar markets can be complex and expensive.
What is a public limited company?
, 2
(ERIFIED PP2)
In a PLC, shares are sold to the public on the stock market. People who own shares
are called 'shareholders'. They become part owners of the business and have a
voice in how it operates. A CEO (chief executive officer) and board of directors
manage and oversee the business' activities.
The advantages and disadvantages of PLCs
Advantages of being a PLC include:
the business has the ability to raise additional finance through share capital
the shareholders have limited liability
there are increased negotiation opportunities with suppliers in terms of prices
because larger businesses can achieve economies of scale
The advantages and disadvantages of internal (organic) growth
An advantage of internal growth is that it is low risk:
a business can maintain its own values without interference from stakeholders
higher production means the business can benefit from economies of scale and
lower average costs
A disadvantage of internal growth is that it is slower growth:
there maybe be a long period between investment and return on investment
, 3
(ERIFIED PP2)
growth may be limited and is dependent on the reliability of sales forecasts
Methods of external (inorganic) growth
Merger
A merger occurs when two businesses join to form a new (but larger) business
Takeover
A takeover occurs when an existing business expands by buying more than half the
shares of another business
The four merger and takeover methods
Horizontal integration occurs when two competitors join through a merger or
takeover. The new business then becomes more competitive and increases its
market share. This gives it more control when negotiating and setting prices.
Forward vertical integration occurs when a business takes control with another that
operates at a later stage in the supply chain.
Backward vertical integration occurs when a business takes control of a business
earlier in the supply chain.
Conglomerate integration occurs when businesses in unrelated markets join
through a takeover or merger. This enables businesses to spread their risk over a
wider range of products and services.
The advantages and disadvantages of external (inorganic) growth
, 4
(ERIFIED PP2)
Advantages of external growth include:
competition can be reduced
market share can be increased very quickly overnight
Disadvantages of external growth include:
it can be expensive to takeover/merge with another business
managers may lack the experience to deal with the other businesses
Disadvantages of being a PLC include:
it is expensive to set up, requiring a minimum of £50,000
there are more complex accounting and reporting requirements
there is a greater risk of a hostile takeover by a rival company
Define economies of scale
Economies of scale are the cost advantages that a business can exploit by
expanding their scale of production. The effect of economies of scale is to reduce
the average (unit) costs of production.
