Business Growth Factors: Opportunities & Threats

Posted on Mar 2, 2025 in Economy

Joint Ventures vs. Strategic Alliances

1. Distinguish between joint ventures and strategic alliances:

  • Joint Venture: Occurs when two or more businesses share the costs, risks, control, and rewards of a business project. They often use this to enter foreign markets.
  • Strategic Alliance: Two or more businesses cooperate in a business venture for mutual benefit, sharing the costs of product development, for example.

Franchising: Advantages and Disadvantages

2. What are the advantages and disadvantages of franchising as a method of growth?

Advantages:

  • Rapid growth without huge amounts of capital.
  • Business idea is already developed, leading to lower start-up costs.
  • The franchisor receives payments from the franchisee.
  • Franchisor benefits from growth without having to worry about running costs.

Disadvantages:

  • Franchisees cannot use their own ideas because they are regulated by the franchisor.
  • Franchisees have to pay a significant percentage of their revenues.
  • Difficult to control daily operations of franchisees and to meet quality standards.
  • Franchisees can damage the reputation of the whole franchise.

Political Stability: Opportunities and Threats

3. Comment on how the political stability of a country can provide both opportunities and threats to business.

A stable political environment can provide benefits. For example, the government can use deregulation to provide opportunities for a business to prosper.

Inflation and Unemployment as Threats

4. Why are inflation and unemployment threats to a business?

Inflation represents a continual rise in the general level of prices in an economy. Unemployment refers to the number of people in the workforce who are willing and able to work but cannot find employment.

STEEPLE Analysis Acronym

5. What does the acronym STEEPLE analysis stand for?

STEEPLE stands for Social, Technological, Economic, Environmental, Political, Legal, and Ethical factors of the external business environment. The analysis helps managers to be thorough and logical in their analysis of external opportunities and threats faced by the business. It is useful when examining the advantages and disadvantages of a decision.

Opportunities vs. Threats

6. Distinguish between opportunities and threats:

  • Opportunities: External factors that present chances for the business.
  • Threats: External factors that can harm a business.

Purpose of a STEEPLE Analysis

7. Outline the purpose of a STEEPLE analysis.

STEEPLE analysis is used in business strategy, such as assessing the feasibility of an overseas investment project. Its purpose is to examine the opportunities and threats of the external environment on business activity.

Stages of the Business Cycle

8. What are the various stages of the business cycle?

  • Boom: Economic activity rises with increased consumer expenditure.
  • Recession: Occurs when there is a fall in Gross Domestic Product (GDP).

Legal Environment: Opportunities and Threats

9. How does the legal environment provide both opportunities and threats to business?

The government imposes rules, regulations, and laws to ensure that the general public is protected. Government intervention can also protect businesses or affect them negatively.

Globalization and Its Impact

10. What is globalization and how does it impact business growth and evolution?

Globalization increases the level of competition. It also increases the customer base, creating vast opportunities for businesses. A greater choice of location can help to reduce a firm’s cost of production.

Multinational Companies

11. What is a multinational company?

A multinational company (MNC) is an organization that operates in two or more countries, with its head office usually based in the home country.

Internal vs. External Growth

12. Distinguish between internal and external growth.

  • Internal Growth: When a business grows organically, using its own capabilities and resources to increase the scale of its operations.
  • External Growth: Growth through dealings with outside organizations, including forming alliances or mergers.