How can businesses grow? [5mins] Let’s think about it…! How can businesses grow? [5mins]

TOPIC: Topic 1: Business Organization and Environment LESSON TITLE: Business Growth COMPETENCY FOCUS: Entrepreneurship (S4): To develop your entrepreneurial skills in preparing a realistic proposal for a new business start-up. You will understand the process a business will have to go through when starting up, including the underlying principles of starting a business.   [IB Learner Profile Development: Inquirer] Learning Objectives By the end of the lesson, you should be able to… LO1) To define the term ‘growth’ LO2) To explain using examples, the difference between internal and external growth LO3) To evaluate joint ventures, strategic alliances, mergers and takeovers as methods of achieving a firm’s growth objectives. SMSC: You will assess the organisational culture of businesses in terms of fundamental structure, purpose and strategy development. CRITICAL THINKING KEY: Knowledge Application Analysis Evaluation

Why do businesses want to grow and expand? Increase profits Increase market share Increase economies of scale Increase their power, status and reputation Reduced their risk of being a takeover target

Business Growth Internal Growth External Growth Mergers Takeover

Business Growth Internal Growth (Organic Growth) can be done by: Opening new branches Opening new shops Opening new factories Building a bigger factory/production plant

Business Growth External Growth can be done by: Merging with another business (competitor perhaps?). Both businesses are now controlled by one Board of Directors. Takeover/acquisition of another business. A company buys over 50% of the shares and therefore becomes the controlling owner.

Task Research each of the forms of external growth and complete the table below: Type of Integration Advantages Disadvantages Impact on stakeholders Horizontal Integration Forward Vertical Integration Backward Vertical Integration Conglomerate Integration

Reflection Complete learning log & keyword glossary.

TOPIC: Topic 1: Business Organization and Environment LESSON TITLE: Business Growth COMPETENCY FOCUS: Entrepreneurship (S4): To develop your entrepreneurial skills in preparing a realistic proposal for a new business start-up. You will understand the process a business will have to go through when starting up, including the underlying principles of starting a business.   [IB Learner Profile Development: Inquirer] Learning Objectives By the end of the lesson, you should be able to… LO1) To define the term ‘growth’ LO2) To explain using examples, the difference between internal and external growth LO3) To evaluate joint ventures, strategic alliances, mergers and takeovers as methods of achieving a firm’s growth objectives. SMSC: You will assess the organisational culture of businesses in terms of fundamental structure, purpose and strategy development. CRITICAL THINKING KEY: Knowledge Application Analysis Evaluation

Other types of growth… Joint Venture Strategic Alliance Franchising

Joint Ventures This is when 2 or more businesses agree to work closely together on a particular project and create a separate division to do so. Advantages: Costs and risks are shared Shared skills, strengths and knowledge More powerful to enter new markets (i.e. international markets) Disadvantages: Styles of management and culture do not blend well If one partner fails, the JV is at risk

Strategic Alliances An agreement between firms in which each agrees to commit resources to achieve an agreed set of objectives. [Therefore working in partnership with someone or another organisation for mutual benefit] Examples of alliances: With universities With suppliers With competitors

Franchising A business that uses the name, logo and trading systems of an existing successful business i.e. Subway, McDonalds. Involves a ‘Franchisee’ and a ‘Franchisor’.

Exam Practice Read case study and respond to questions Pg. 75 ‘Jet Airways takes over Air Sahara’. [35 marks, 50mins]

Business Plan Update Business Plan.