Recent Changes

Thursday, March 3

  1. page 1.7 Growth and Evolution edited ... The main disadvantage of external growth is the cost. The cost of external growth tends to be …
    ...
    The main disadvantage of external growth is the cost. The cost of external growth tends to be relatively higher than that of internal growth. Takeover bids can be especially expensive.
    Other advantages are covered within the different methods of external growth.
    External growth - Joint ventures, Strategic alliances, Mergers and takeovers
    Joint venture
    A joint venture occurs when two or more businesses decide to split costs, risks, control and rewards of a business project. As such, they form a new legal entity, while maintaining both their identities. For example, Japan's Sony and Sweden's Ericsson created the joint venture Sony Ericsson.
    (view changes)
    3:24 pm

Tuesday, March 1

  1. page 1.7 Growth and Evolution edited ... Help a firm to evolve, thereby spreading risks across several distinct markets Limitation of …
    ...
    Help a firm to evolve, thereby spreading risks across several distinct markets
    Limitation of external growth
    ...
    especially expensive.
    Other advantages are covered within the different methods of external growth.
    ...
    and takeovers
    Joint venture
    A joint venture occurs when two or more businesses decide to split costs, risks, control and rewards of a business project. As such, they form a new legal entity, while maintaining both their identities. For example, Japan's Sony and Sweden's Ericsson created the joint venture Sony Ericsson.
    ...
    Ansoff matrix
    (Explain the value of the Ansoff matrix as a decision-making tool)
    ...
    existing markets.
    {Ansoff-Matrix.gif} The Ansoff matrix created in 1957 by Professor Igor Ansoff showing various strategies for product and market growth strategies
    Apply the Ansoff matrix growth strategies to a given situation.
    (view changes)
    6:31 am
  2. page 1.7 Growth and Evolution edited ... They have to pay a significant percentage of their revenues to the franchisor Less flexibilit…
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    They have to pay a significant percentage of their revenues to the franchisor
    Less flexibility for franchisees to use their own initiative due to restraints from the franchisor
    ...
    as a growth strategy.growth.
    Ansoff matrix
    Explain

    (Explain
    the value
    ...
    a decision-making tool. tool)
    The Ansoff matrix, named after its creator Professor Igor Ansoff in 1957, shows strategies depending on if a business wants to market new or existing products in either new or existing markets.
    {Ansoff-Matrix.gif} The Ansoff matrix created in 1957 by Professor Igor Ansoff showing various strategies for product and market growth strategies

    Apply the Ansoff matrix growth strategies to a given situation.
    (view changes)
    6:31 am
  3. 6:30 am
  4. page 1.7 Growth and Evolution edited ... Regulatory problems {growth_terms.jpg} Diagrams depicting the distinct types of external (ino…
    ...
    Regulatory problems
    {growth_terms.jpg} Diagrams depicting the distinct types of external (inorganic) growth possible: joint ventures, strategic alliances, mergers and takeovers
    Porter's Generic Strategies (HL)
    Evaluate internal
    Franchises
    (Analyse the advantages
    and external growth strategies as methodsdisadvantages of a franchise for both franchisor and franchisee)
    A franchise is a form
    of business expansion. (HL)
    Examine how Porter's generic strategies may provide
    ownership where a frameworkperson or business buys a license to trade using another firm's name, logo, brands and trademarks. In return for building competitive advantage. (HL)
    Cost leadership
    Differentiation (Derivatives)
    Focus
    Franchises
    Analyse
    this benefit, the advantagespurchaser of a franchise (franchisee) pays a license fee to the parent company of the business (franchisor).
    Some benefits for the franchisor: {franchise.gif} Examples of franchised businesses
    Parent company experiences rapid growth without risking money
    Allows business to have international presence
    Economies of scale
    Benefit from growth without worrying about running costs
    Receive royalty payment that is set as a percentage of profits
    Franchisees have more incentives then salaried managers meaning success
    Franchisees will have greater awareness of local market conditions
    and disadvantagesculture
    Advantages for the franchisee:
    Low risk due to tried and tested formula
    Lower start-up costs since the business idea was already developed
    Added-services will be provided by the franchisor
    Benefits from large scale advertising by parent company
    Disadvantages for the franchisor:
    Difficult to control activities
    of franchisees
    Huge risk in reputation by allowing other businesses to use their names
    Not as quick a method of growth as mergers or acquisitions
    Pitfalls for the franchisee:
    Money to buy
    a franchise is expensive
    They have to pay a significant percentage of their revenues to the franchisor
    Less flexibility
    for bothfranchisees to use their own initiative due to restraints from the franchisor and franchisee.
    Evaluate the use of franchising as a growth strategy.
    Ansoff matrix
    (view changes)
    6:20 am
  5. file franchise.gif uploaded
    6:19 am
  6. page 1.7 Growth and Evolution edited ... Dilution of control and ownership External growth (Evaluate joint ventures, strategic allia…
    ...
    Dilution of control and ownership
    External growth
    (Evaluate joint ventures, strategic alliances, mergers and takeovers as methods of achieving a firm’s growth objectives)
    External growth, often referred to as inorganic growth, occurs through dealings with outside organizations. Such growth comes in the form of alliances or mergers with other firms or through acquisitions (takeovers), which are collectively known as the amalgamation or integration of firms.
    Benefits of external growth
    ...
    Limitation of external growth
    The main disadvantage of external growth is the cost. The cost of external growth tends to be relatively higher than that of internal growth. Takeover bids can be especially expensive.
    Other advantages and disadvantages are covered
    External growth - Joint ventures, Strategic alliances, Mergers and takeovers
    (EvaluateJoint venture
    A
    joint ventures,venture occurs when two or more businesses decide to split costs, risks, control and rewards of a business project. As such, they form a new legal entity, while maintaining both their identities. For example, Japan's Sony and Sweden's Ericsson created the joint venture Sony Ericsson.
    Some benefits are:
    Higher sales and market share
    Synergy
    Spreading costs and risks
    Entry to foreign markets
    Cheap method
    Exploitation of local knowledge
    High success rate
    Strategic alliances
    A
    strategic alliances, mergersalliance is quite similar to a joint venture in the sense that they form a mutually beneficial affiliation and takeoversthey share costs of product development, operations and marketing as methodswell as the risks and rewards of achieving a firm’s growth objectives)business project. However the affiliated businesses remain independent organizations and they do not form a new entity
    Some benefits include:
    Synergy
    Creditability and brand awareness
    Economies of scale
    Benefits from added value services for customers
    Mergers and takeovers (Mergers and acquisitions)
    Mergers and acquisitions refer to the amalgamation or integration of two or more business to form one single company. A merger takes place when two firms actually agree to form a new company. While a takeover or acquisition occurs when a company buys a controlling interest in another company, in other words by buying enough shares in the target business to hold a majority stake. In order to make shareholders of the target company to sel their shares, the price offered by the buying company is likely to be well above stock market value of the shares.
    There are some advantages:
    Greater market share
    Economies of scale
    Synergy
    Survival
    Diversification
    However there are also some disadvantages:
    Loss of control
    Culture clash
    Conflict
    Redundancies
    Diseconomies of scale
    Regulatory problems

    {growth_terms.jpg} Diagrams depicting the distinct types of external (inorganic) growth possible: joint ventures, strategic alliances, mergers and takeovers
    Porter's Generic Strategies (HL)
    (view changes)
    5:46 am

Friday, February 25

  1. page 3.1 Sources of Finance edited ... Such as receiving supplier goods on trade credit and paying the money back out of profits afte…
    ...
    Such as receiving supplier goods on trade credit and paying the money back out of profits after the goods/services have been sold
    Government Grants/Subsidies
    {http://www.cartoonstock.com/newscartoons/cartoonists/rma/lowres/rman3233l.jpg}
    Subsidies are financial aid given by an external factor to help reduce a producer's cost of production (this does not include profit)
    Advantages :
    ...
    Examples:
    Government grants to hospitals
    Donations {http://www.chinookpta.com/images/donation.jpg}
    These financial gifts from individuals or organization to a business
    Advantages:
    ...
    Example:
    CDNIS built the art complex, Leo Lee donated $$$$$ to support the cause and now the art complex is named after him.
    (Debt) Factoring {http://www.goldinfinancial.com/eng/images/services/golden_diagram.gif}
    Debtors are people who owe money to a business. Debt factoring is a financial service that allows a business to raise funds based on the value owed to them by their debtors.
    Advantages:
    ...
    Example:
    Receiving 80% of debtors outstanding debt on selling fabric abroad
    Hire Purchase {http://www.cartoonstock.com/newscartoons/cartoonists/mba/lowres/mban23l.jpg}
    Paying for an item in parts (installment plan) vehicles, machinery, office equipment and farming machinery. A deposit (down payment) is paid on the item.
    Advantages
    ...
    Example:
    Supplier sells the goods. Supplier delivers the goods to the customer who will eventually purchase them. The hire purchase arrangement exists between them.
    Mortgages {http://www.canadian-mortgage-information.com/image-files/snoopy-subprime-mortgage.gif}
    Mortgage is a secured loan specifically for the purchase of a property. The borrower use their own asset as security for loan then the borrower gets the money and pays back the loan time to time with interest. If the borrower cannot pay back the loan the bank takes the asset.
    Advantages:
    ...
    A business seeks to expand and needs a new shop
    Debentures
    ...
    annual interest paymentpaymen
    {http://www.thegeminigeek.com/wp-content/uploads/2009/10/Debentures.jpg}
    t
    to the
    Advantages to Debenture Holders
    they receive annual interest/ benefits (VIP status or free passes) regardless of whether or not the business is making money
    (view changes)
    12:18 am

Thursday, February 24

  1. page 3.1 Sources of Finance edited ... Investing Extra Cash Cash that does not need to be spent immediately => interest-bearing s…
    ...
    Investing Extra Cash
    Cash that does not need to be spent immediately => interest-bearing savings account. Companies earn interest with the extra cash from investors.
    {http://www.cartoonstock.com/newscartoons/cartoonists/cwl/lowres/cwln229l.jpg}
    Advantages
    earns interest for the business
    ...
    Example:
    Retained Profits
    ...
    use within the{http://www.bized.co.uk/images/retained_profit.gif} the business (after
    Advantage:
    no need to rely on borrowing (no interest charges)
    ...
    may not be sufficient, so other sources may still be needed
    less is available for distributing to shareholders
    Example:
    Buying new land for more factories (long term)
    {http://www.cartoonstock.com/lowres/jna1096l.jpg}
    Selling Assets
    The selling of excess or underused assets
    ...
    Example:
    Working Capital
    {http://www.cartoonstock.com/lowres/dro0476l.jpg}
    The $ available for day-to-day running of business that comes from selling goods & services. It is used to pay everyday costs (ex. wages, bills, suppliers)
    Advantages
    ...
    cumulative payment, which allowed shareholders to get twice the dividend payments in two years if the first year did not yield extremely positive results
    have a steady source of profit
    Disadvantages
    {http://www.cartoonstock.com/newscartoons/cartoonists/ato/lowres/aton2224l.jpg}

    do not have voting rights in companies and their administrative decisions
    Trade Credit
    (view changes)
    11:40 pm
  2. page 3.1 Sources of Finance edited ... Example: New companies needs expensive equipments to run the business: office, equipment leas…
    ...
    Example:
    New companies needs expensive equipments to run the business: office, equipment leasing from larger companies like Apple
    Investing Extra Cash
    Cash that does not need to be spent immediately => interest-bearing savings account. Companies earn interest with the extra cash from investors.
    Advantages
    earns interest for the business
    cash rich companies can earn a significant amount of interest on their cash deposits.
    Disadvantages
    low returns
    opportunity cost for companies to keep cash at hand instead of the bank.
    Example:
    Retained Profits
    Internal profits or ploughed-back profits. Value of profits the business keeps hold of to use within the business (after paying taxes to government and dividends to shareholders). This is usually used for purchasing or upgrading fixed assets and sometimes kept in contingency funds in case of emergencies and unforeseeable expenditure in the future
    Advantage:
    no need to rely on borrowing (no interest charges)
    Disadvantages:
    may not be sufficient, so other sources may still be needed
    less is available for distributing to shareholders
    Example:
    Buying new land for more factories (long term)
    Selling Assets
    The selling of excess or underused assets
    Advantages
    Immediate retrieval of cash from purchaser
    Disadvantages
    Assets may grow in value
    Transferal has cost
    Assets possibly useful for loans
    Example:
    Working Capital
    The $ available for day-to-day running of business that comes from selling goods & services. It is used to pay everyday costs (ex. wages, bills, suppliers)
    Advantages
    internal source; no interest
    easily accessible
    Disadvantages
    cannot fund larger projects
    short-term liquidity is affected
    Example:
    A payment for electricity bills
    Preferred Shares
    Preferred Shares are shares which are held by shareholders which yield a fixed amount of dividends from a companies profits.
    Advantages
    yield a fixed amount
    given out before Ordinary Share dividends are handed out
    preferred Shares will have a general idea of the amount they will receive every year
    cumulative payment, which allowed shareholders to get twice the dividend payments in two years if the first year did not yield extremely positive results
    have a steady source of profit
    Disadvantages
    do not have voting rights in companies and their administrative decisions
    Trade Credit
    A system of trade where good/service is received; payment does not have to be made until a later date
    Advantages:
    less strain on cash flow
    trial use of product is possible
    Disadvantages
    more financial processing is required
    easy to buy more than what the business can pay for
    Example:
    Such as receiving supplier goods on trade credit and paying the money back out of profits after the goods/services have been sold
    Government Grants/Subsidies
    Subsidies are financial aid given by an external factor to help reduce a producer's cost of production (this does not include profit)
    Advantages :
    External but not need to be payed back
    Allows the producer to sell the product at a cheaper price
    reduce cost of production
    Increase demand for their goods and services as a result of price cut
    Disadvantages:
    Is sometimes not enough
    Very hard to obtain
    Examples:
    Government grants to hospitals
    Donations
    These financial gifts from individuals or organization to a business
    Advantages:
    Charities, schools, hospitals and universities often receive donations to boost their finances
    no direct benefit to the donor i.e. no interest or payback required
    generally large sums
    Disadvantages:
    some donations have term and conditions (i.e. displaying the donor's name in recognition)
    Very difficult to obtain if not a public service like schools, hospitals etc.
    Is sometimes not sufficient
    Example:
    CDNIS built the art complex, Leo Lee donated $$$$$ to support the cause and now the art complex is named after him.
    (Debt) Factoring
    Debtors are people who owe money to a business. Debt factoring is a financial service that allows a business to raise funds based on the value owed to them by their debtors.
    Advantages:
    reduce the probability of BAD DEBT-DEBTORS
    non-recourse factoring allows for insurance against bad debts
    Don't have to chase up their own debtors
    Immediate source of finance
    Disadvantages:
    Without non-recourse factoring the company will still have to absorb losses
    Expensive
    Example:
    Receiving 80% of debtors outstanding debt on selling fabric abroad
    Hire Purchase
    Paying for an item in parts (installment plan) vehicles, machinery, office equipment and farming machinery. A deposit (down payment) is paid on the item.
    Advantages
    can pay for items in installments (12 or 24 months)
    item belongs to the business once all payments have been made
    different from leasing
    Disadvantages
    If the buyer fail to pay in time, then the lender can take the item back
    Example:
    Supplier sells the goods. Supplier delivers the goods to the customer who will eventually purchase them. The hire purchase arrangement exists between them.
    Mortgages
    Mortgage is a secured loan specifically for the purchase of a property. The borrower use their own asset as security for loan then the borrower gets the money and pays back the loan time to time with interest. If the borrower cannot pay back the loan the bank takes the asset.
    Advantages:
    better cash flow
    retain ownership
    low interest rate
    Disadvantages:
    high risk for small businesses
    Example:
    A business seeks to expand and needs a new shop
    Debentures
    A type of long-term loan to a business with the promise of a fixed annual interest payment to the debenture holders. Debentures are similar to shares, however, debenture holders DO NOT have voting rights on how the business is run.
    Advantages to Debenture Holders
    they receive annual interest/ benefits (VIP status or free passes) regardless of whether or not the business is making money
    Disadvantages to Debenture Holders
    no say in how the business will run
    greatly depends on the business' success to raise it's value
    Advantages to Business
    provides good long-term finance without losing control of the business
    Disadvantages to Business
    firm increases the amount of long-term liabilities raising the amount of interest payments to the lenders
    Example:
    Private Schools in Hong Kong (CDNIS), Football Clubs etc.

    (view changes)
    11:22 pm

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