EDEXCEL GCSE BUSINESS · PAPER 2
Exam Practice: Business Growth
Business growth · Growing the business · Lesson 1 of 4 · 15 marks · 20 minutes
Name Date
Answer all questions. Use the context of the business in the question where one is given.
Question 1 DEFINE [1 mark]
Define the term 'organic growth'.
Question 2 OUTLINE [2 marks]
Outline one benefit to a business of becoming a public limited company.
Question 3 EXPLAIN [3 marks]
Explain one disadvantage to a business of growing through a takeover.
Question 4 JUSTIFY [9 marks]
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SOURCE GreenLeaf Ltd makes plant-based ready meals sold in UK supermarkets. Its sales have grown by 20% a year for five years. It wants to grow faster. Option 1: Develop a new range of plant-based desserts using its own research and development team. Option 2: Take over a small rival that makes plant-based snacks and has contracts with two supermarkets GreenLeaf does not supply. |
Justify which one of these two options GreenLeaf Ltd should choose.
Answers
Check your answer only once you have written one.
Question 1 [1 mark]
When a business grows by expanding its own activities, such as opening new branches or launching new products.
▸ Growth from within / using the business's own resources 1 mark
Question 2 [2 marks]
It can raise large amounts of finance by selling shares to the public (1), which it can use to open new branches or develop new products without borrowing (1).
▸ A benefit identified, e.g. raise large sums / higher profile / easier to borrow 1 mark
▸ Developed: how this helps the business 1 mark
Question 3 [3 marks]
It can be very expensive (1). The business must pay the other company's shareholders enough to gain control, often more than the business is worth (1). This may mean borrowing large sums, increasing interest costs and reducing profit for years (1).
▸ A disadvantage identified, e.g. cost / culture clash / job losses / harder to manage 1 mark
▸ First linked point of explanation 1 mark
▸ Second linked point of explanation 1 mark
Question 4 [9 marks]
Option 1 is organic growth. GreenLeaf already understands plant-based food and its customers, so developing desserts builds on its strengths and keeps full control. It can pay for it gradually from retained profit. However, R&D takes time, and the new range may not succeed, so growth would be slow. Option 2 is external growth. Taking over the rival would instantly give GreenLeaf new products and, importantly, contracts with two new supermarkets, reaching customers it cannot currently reach. But the takeover would be expensive, and the two businesses' ways of working may clash. On balance GreenLeaf should choose Option 2, because the new supermarket contracts give it immediate access to new markets that would take years to win organically. However, this depends on whether it can afford the takeover without taking on so much debt that it damages its profit.
▸ AO2 (Application, 3 marks): uses the context - plant-based meals, 20% growth, R&D team, the rival's supermarket contracts Level 1-3
▸ AO3a (Analysis, 3 marks): chains of reasoning about each option Level 1-3
▸ AO3b (Evaluation, 3 marks): a justified choice with a supported judgement Level 1-3