How Business Organisations How Business Organisations DevelopDevelop

OCR DiplomaOCR Diploma

Some business owners have no desire to Some business owners have no desire to grow or expand.grow or expand.

They do not want to run a chain of shops.They do not want to run a chain of shops.

Why?Why?

They simply want to earn enough to have They simply want to earn enough to have a good living, cover expenses/costs and a good living, cover expenses/costs and have some leisure time as well.have some leisure time as well.

Business that want developBusiness that want develop

Most businesses change over time.Most businesses change over time.

Some grow rapidly and then collapse or Some grow rapidly and then collapse or encounter serious problems.encounter serious problems.

Others grow more steadily and carefully Others grow more steadily and carefully stage by stage.stage by stage.

Some may even end up as household Some may even end up as household names.names.

All businesses must regularly review the way All businesses must regularly review the way they operate to remain competitive and up-to-they operate to remain competitive and up-to-date.date.

No business can afford to stand still egNo business can afford to stand still eg

Most businesses today have a website, whereas Most businesses today have a website, whereas these were virtually unknown 10 years ago.these were virtually unknown 10 years ago.

Most businesses accept a range of payment Most businesses accept a range of payment methods although many large firms do not now methods although many large firms do not now accept ………..accept ………..

Points to considerPoints to consider

Existing business ownership Existing business ownership

- Is it still appropriate?- Is it still appropriate?

CapitalCapital

How will the development be financed?How will the development be financed?

LiabilityLiability

Issues of limited or unlimited liabilityIssues of limited or unlimited liability

SpecialisationSpecialisation

As the business expands, should it As the business expands, should it continue to do what it does already and is continue to do what it does already and is good at?good at?

DiversificationDiversification

Alternatively, should the business look for Alternatively, should the business look for additional business opportunities or even additional business opportunities or even change what it does altogether?change what it does altogether?

Raising CapitalRaising Capital

BanksBanks

- they are more inclined to lend to limited - they are more inclined to lend to limited companies than sole traders or companies than sole traders or partnerships. Why?partnerships. Why?

Limited companies can issue additional Limited companies can issue additional shares. How?shares. How?

LTD companies and plc companiesLTD companies and plc companies

Venture capital companiesVenture capital companies

- in return for lending money, they take - in return for lending money, they take shares in the firm.shares in the firm.

ReservesReserves

- where a firm uses its own reserves - where a firm uses its own reserves (savings). (savings).

Specialisation or diversification?Specialisation or diversification?

A large pharmacy and cosmetics business A large pharmacy and cosmetics business wants to expand but is under pressure for wants to expand but is under pressure for business by its competitors. It has a good business by its competitors. It has a good name and many loyal customers, but its name and many loyal customers, but its profits are starting to decline. The profits are starting to decline. The managers want to see the business grow managers want to see the business grow and develop but are split into two camps.and develop but are split into two camps.

Those who think they should continue to Those who think they should continue to do what they know – and if necessary curb do what they know – and if necessary curb developments until they get this right.developments until they get this right.

Those who think they should offer Those who think they should offer additional or different goods or services additional or different goods or services such as eye tests, nail bars and ‘men only’ such as eye tests, nail bars and ‘men only’ stores.stores.

Boots Boots

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SpecialisationSpecialisation

- where the organisation concentrates on - where the organisation concentrates on its its core businesscore business..

DiversificationDiversification

- deliberately extending the range of goods - deliberately extending the range of goods or services to meet new challenges.or services to meet new challenges.

Why?Why?

- because the existing area is seen as too - because the existing area is seen as too narrow and therefore too risky.narrow and therefore too risky.

- because new opportunities are identified.- because new opportunities are identified.

- to continue to operate in the normal way - to continue to operate in the normal way but extend services or operations.but extend services or operations.

Express DairiesExpress Dairies

To deliver milkTo deliver milk

Now deliver books, CDs, contact lenses Now deliver books, CDs, contact lenses and magazines to householders.and magazines to householders.

Under a 7 yr licence, they can now also Under a 7 yr licence, they can now also deliver up to 46 million postal items a year.deliver up to 46 million postal items a year.

In other cases the business may change In other cases the business may change direction altogether.direction altogether.

FarmingFarming

Camping and Caravan parksCamping and Caravan parks

QuadbikingQuadbiking

Self catering holidaysSelf catering holidays

Forwards or BackwardsForwards or Backwards

MergerMerger

The business joins with another and is The business joins with another and is now much larger and more powerful than it now much larger and more powerful than it was before.was before.

Halifax merged with Bank of Scotland to Halifax merged with Bank of Scotland to become HBOS.become HBOS.

Royal Bank of Scotland merged with Nat Royal Bank of Scotland merged with Nat West.West.

Why?Why?

Both organisations benefit.Both organisations benefit.

They are larger and their overall customer They are larger and their overall customer base is much bigger.base is much bigger.

They can reduce costs by combining They can reduce costs by combining premises and reducing staff.premises and reducing staff.

TakeoverTakeover

One company buys control of another by One company buys control of another by buying its shares.buying its shares.

It may buy a competitorIt may buy a competitor

It may buy a business which has expertise It may buy a business which has expertise that it doesn’t possessthat it doesn’t possess

It may business in another area or region It may business in another area or region so that it can expand quickly eg Scotlandso that it can expand quickly eg Scotland

DemergerDemerger

The company separates the business so The company separates the business so that one part is ‘hived off’ and set up as a that one part is ‘hived off’ and set up as a separate organisation.separate organisation.

BT demerged its mobile phone business BT demerged its mobile phone business and set it up as a new company because it and set it up as a new company because it wanted to separate its mobile phone wanted to separate its mobile phone operations from its main business.operations from its main business.

The impact of developmentThe impact of development

Increase customers, sales and profitIncrease customers, sales and profit

Reduce their operating costs per item sold Reduce their operating costs per item sold so that they can sell at a more competitive so that they can sell at a more competitive priceprice

Offer a wider range of services or productsOffer a wider range of services or products

Operate over a wider areaOperate over a wider area

Aims, objectives and strategy may be Aims, objectives and strategy may be affected by ongoing developments.affected by ongoing developments.

Changes to jobs and job security – Changes to jobs and job security – increase or decrease in jobs.increase or decrease in jobs.

Company reorganisationCompany reorganisation

Different methods of working and different Different methods of working and different administrative proceduresadministrative procedures

Different working conditions or place of Different working conditions or place of work.work.

Selling to new markets.Selling to new markets.

Greater public scrutiny.Greater public scrutiny.

Over To YouOver To You

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