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Unit5B
start-up options, production options ad expansion
Term | Definition |
---|---|
Ownership Options for start up | sole trader, partnership, private limited company |
Sole trader | one person owns and runs a business |
Unlimited liability | Personally liable for the debts of the business including their personal assets should business go bankrupt |
Partnership | 2-20 people decide to form a business |
Private Limited Company | 1-99 shareholders invest in a company and enjoy limited liability |
Production Options | job, batch, mass |
Job Production | made to order, labour-intensive, specialist skills, once-off |
Batch Production | Groups of identical items produced, same labour & machinery, used for producing range of goods e.g. blue shirts, then white shirts |
Mass Production | Large quantities of same product, automated using CAM e.g. calculators, toys, washing powder |
Business Plan | sets out how business will achieve its objectives, outlines marketing, production, and financial plans |
Business Expansion | acquiring more assets whilst selling to more markets |
Economies of scale | When a firm increases its production the unit cost reduces |
Finance for Expansion | Equity Capital, Debt Capital Grants |
Equity Capital | Share capital, retained earnings, Venture Capital, BES |
Venture Capital | Finance for high risk ventures (seed capital), Venture capital companies take part ownership in new business |
Business Expansion Scheme | Investors can invest in company and this is written off against the tax liability of investor company |
Debt Capital | Long-term debt which has to be repaid with interest |
Grants | Non-repayable sum given by government/EU once condiions are met |
Methods of Expansion | Organic & Inorganic |
Organic Growth | growth from within the business, increasing sales in existing markets, developing new markets & products, exporting, licensing, franchising |
Licensing | Licensor grants permission to another firm to produce & distribute products under a trade name, for fixed period, |
Franchising | Business with established name, logo & track record allows others to supply its products using same successful formula |
Inorganic Growth | external growth through strategic alliance, merger, takeover (acquisition) |
Strategic alliance | agreement between different firms to actively promote business interests which are benefit to both |
Joint Venture | form of partnership set up for a commercial purpose e.g. AIB & AVIVA venture on life pensions |
Merger | Voluntary agreement to create new legal entity which both will benefit from e.g. Waterford PLC & Avonmore PLC to form Glanbia, permanent tsb |
Takeover | buying of 51% of shares in another company, friendly/hostile |