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Expanding the business
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Learn the active vocabulary of the Unit and get ready to use it in your further work.
| сustomer –покупець; еxpand – розширювати; borrowing – позика; to delegate the tasks – передава-ти /розподіляти обов’язки; working capital -робочий капі-тал; profitability -рентабельність, прибутковість; to diversify – урізноманітнювати / диверсифікувати; debt – борг; | lender – кредитор; downturn – спад економічної актив-ності; interest charges - виплати процен-тів; market share – частка ринку; objective – мета, ціль; up-market/high end– ринок елітних товарів; down-market/low end– ринок дешевих товарів; product range –товарний асорти-мент. |
Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.
Text A
Don’t put all your eggs in one basket
The first question to ask yourself is " Why do I want to expand? " For many people the answer is simply " I want to make more money". For others there is actually no alternative for growth. Your customers want more of what you are offering - to disappoint them could lead them to cancel all their business with you. You are therefore forced into expansion.
If you have decided to grow, you have to answer a number of questions:
- Should I use my own resources or increase my borrowings or attract new capital from outside?
- Should I develop new products or services?
- Should I delegate some of the tasks to other people to save myself from overwork?
Growth usually requires new finance. If you think of raising your finance, two words of warning: 'over-gearing' and 'over-trading'.
'Over-gearing' occurs when a company borrows too much and has to devote too large a proportion of its income to meeting interest charges and repaying loans. The problem with borrowing a large amount of money is that if the income of your business falls, it is often difficult to bring about a corresponding reduction in borrowing.
'Over-trading' occurs when turnover expands much faster than working capital, particularly cash. The increased volume of orders leads to more staff employed, and the business has insufficient cash. It therefore has a rising borrowing requirement and may also become heavily dependent on trade creditors. Interest charges on the borrowed money may further reduce profitability. As a matter of fact, business may run out of credit. Many basically profitable businesses have failed this way.
Many businesses grow because they have one major customer. In lots of ways, this is good news. It means that you must be doing something right. It can also be economical of your time and effort to deal with one set of people, instead of dealing with many different customers. But there are dangers too.
A sudden change of circumstances can cause the sudden loss of a large proportion of your business. To avoid any complacency, seek new business and develop it in order to build a broad and well-balanced range of customers.
Notes: to gear – ставити в залежність
Exercise 1. Read the text and answer the questions. Discuss the answers with your partner.
1. What are usually the main reasons for expanding business?
2. Would you try to expand your business, if you have any?
3. Would you try and finance your growth from your own resources or would you easily increase your borrowings?
4. Would you rather overwork, or would you employ more staff?
5. Do you think expansion is a risky operation? Why?
Exercise 2. Decide if the statements are true (T) or false (F).
| 1. If you want to expand your business, you want to make more money. | |
| 2. You are forced into expansion, because your customers want more of what you are offering. | |
| 3. Expansion often means more profit. | |
| 4. Expansion often means more people employed. | |
| 5. Expansion often means attracting outside capital. | |
| 6. Expansion often means delegating some of the tasks to other people. | |
| 7. Expansion often means running more risk.. | |
| 8. Expansion often means developing new products or services. | |
| 9. To have one permanent customer in business is very good. |
Exercise 3. Match the verbs on the left with the nouns and phrases on the right.
| 1) to make 2) to be forced into 3) to attract 4) to develop 5) to run 6) to employ 7) to run out 8) to avoid | a) complacency b) of credit c) the staff d) the business e) new products and services f) capital g) expansion h) money |
Exercise 4. Complete the sentences using the words from the text.
1. You expand because your … want more of what you are offering.
2. When I expand, I can … new capital from outside.
3. I would … some of the tasks to other people to save myself from overwork.
4. 'Over-gearing' occurs when a company … too much.
5. 'Over-trading' occurs when … expands much faster than working capital, particularly cash.
6. To avoid any complacency, … new business
Text B.
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