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How Business Organisations Develop OCR Diploma
Some business owners have no desire to grow or expand. They do not want to run a chain of shops. Why? They simply want to earn enough to have a good living, cover expenses/costs and have some leisure time as well.
Business that want develop Most businesses change over time. Some grow rapidly and then collapse or encounter serious problems. Others grow more steadily and carefully stage by stage. Some may even end up as household names.
All businesses must regularly review the way they operate to remain competitive and up-todate. No business can afford to stand still eg Most businesses today have a website, whereas these were virtually unknown 10 years ago. Most businesses accept a range of payment methods although many large firms do not now accept ………. .
Points to consider Existing business ownership - Is it still appropriate? Capital How will the development be financed? Liability Issues of limited or unlimited liability
Specialisation As the business expands, should it continue to do what it does already and is good at? Diversification Alternatively, should the business look for additional business opportunities or even change what it does altogether?
Raising Capital Banks - they are more inclined to lend to limited companies than sole traders or partnerships. Why? Limited companies can issue additional shares. How? LTD companies and plc companies
Venture capital companies - in return for lending money, they take shares in the firm. Reserves - where a firm uses its own reserves (savings).
Specialisation or diversification? A large pharmacy and cosmetics business wants to expand but is under pressure for business by its competitors. It has a good name and many loyal customers, but its profits are starting to decline. The managers want to see the business grow and develop but are split into two camps.
Those who think they should continue to do what they know – and if necessary curb developments until they get this right. Those who think they should offer additional or different goods or services such as eye tests, nail bars and ‘men only’ stores.
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Specialisation - where the organisation concentrates on its core business.
Diversification - deliberately extending the range of goods or services to meet new challenges. Why? - because the existing area is seen as too narrow and therefore too risky. - because new opportunities are identified. - to continue to operate in the normal way but extend services or operations.
Express Dairies To deliver milk Now deliver books, CDs, contact lenses and magazines to householders. Under a 7 yr licence, they can now also deliver up to 46 million postal items a year.
In other cases the business may change direction altogether. Farming Camping and Caravan parks Quadbiking Self catering holidays
Forwards or Backwards Merger The business joins with another and is now much larger and more powerful than it was before. Halifax merged with Bank of Scotland to become HBOS. Royal Bank of Scotland merged with Nat West.
Why? Both organisations benefit. They are larger and their overall customer base is much bigger. They can reduce costs by combining premises and reducing staff.
Takeover One company buys control of another by buying its shares. It may buy a competitor It may buy a business which has expertise that it doesn’t possess It may business in another area or region so that it can expand quickly eg Scotland
Demerger The company separates the business so that one part is ‘hived off’ and set up as a separate organisation. BT demerged its mobile phone business and set it up as a new company because it wanted to separate its mobile phone operations from its main business.
The impact of development Increase customers, sales and profit Reduce their operating costs per item sold so that they can sell at a more competitive price Offer a wider range of services or products Operate over a wider area
Aims, objectives and strategy may be affected by ongoing developments. Changes to jobs and job security – increase or decrease in jobs. Company reorganisation Different methods of working and different administrative procedures
Different working conditions or place of work. Selling to new markets. Greater public scrutiny.
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