Chapter – 4

Enterprise
Growth
Strategies
 CBSE 2023-24 Sample Paper

Q1. How is franchising a better option for external expansion in case of start-ups? (2 Marks)

Ans 1. Franchising changed the working of the startups because already the product carriers a name in the
market already which is the most difficult part of business to establish.
2. Startups take up training to understand the product and franchisors make franchises fully conversant
with the product/services that they have to offer.
3. The start-ups can grow fast without having to increase labour, operating costs and blocking running
expenses because normally buyers straight walk up to them.
(Any two)

Q2. How is the channel of distribution influenced by the type of buyer? (2 Marks)

Ans Buyers can be of two types: General Buyers and Industrial Buyers.
If more buyers of the particular product belong to general category then there will be more middlemen.
The reason is that the product has to reach the ultimate customer who can be anywhere in the country
and to reach them, numerous middlemen are required.
In case of industrial buyers there will be fewer middlemen. The reason is the industry is the ultimate
consumer and to reach them there is no need to have many intermediaries in between.

Q3. What is the most essential component of mergers? Distinguish between the two forms of this
component. How does this factor play a key role in deciding whether any organization should go for a
merger? (5 Marks)

Ans Synergy is the most essential component of mergers.

In mergers, synergy between the participating firms determines the increase in value of the combined
entity. In other words, it refers to the difference between the value of the combined firm and the value of
the sum of the participants. Synergy accrues in the form of revenue enhancement and cost savings.
a) Operating synergy: This refers to the cost savings that come through economies of scale or increased
sales and profits. It leads to the overall growth of the firm.
b) Financial synergy: This is the direct result of financial factors such as lower taxes, higher debt capacity or
better use of idle cash. When a firm with accumulated losses or unabsorbed depreciation merges with a
profitable firm and the combined firm can set off such losses against its profits, a financial synergy, known
as tax shield, occurs.

Q4. Differentiate between ‘merger’ and ‘acquisition’ as forms of external expansion. Explain the ways in
which one business can acquire another. (5 Marks)

Ans Merger
(a) A merger is a combination of two companies into one larger company.
(b) All the combining companies are dissolved and only the new entity continues to operate.
Acquisition
(a) An acquisition is taking control of a company, leading to its takeover. It could be an acquisition of
tangible assets, intangible assets, rights and other kinds of obligations.
(b) Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to
take over an existing firm's operations and niche compared to expanding on its own.

There are four types of acquisitions:

1. Friendly acquisition: Both the companies approve of the acquisition under friendly terms. There is no
forceful acquisition and the entire process is cordial.
2. Reverse acquisition: A private company takes over a public company.
3. Back flip acquisition: A very rare case of acquisition in which the purchasing company becomes a
subsidiary of the purchased company.
4. Hostile acquisition: Here, as the name suggests, the entire process is done by force. The smaller
company is either driven to such a condition that it has no option but to say yes to the acquisition to save
its skin or the bigger company just buys off all its share, thereby establishing majority and hence initiating
the acquisition.
 CBSE 2022-23 Compartment Paper

Q1. Coca-Cola and Pepsi are the companies operating in the beverage market. If they decide to merge
together to create a large organization with a bigger market share, the type of merger so formed will be
called: (1 Mark)
a. Market extension merger
b. Conglomerate
c. Horizontal merger
d. Vertical merger

Ans c. Horizontal Merger

Read the following text and answer questions from 2 to 6

Shri Ray, envisioned a restaurant chain that would be known for its consistently high-quality food and
uniform method of its preparation. To accomplish this, he took a novel approach. He persuaded both
franchisors and suppliers to buy into his vision, working not for the
organisation but for themselves in collaboration.
“In business for yourself, but not by yourself”, he advertised. Today, franchising is helping thousands of
individuals to be their own
boss and operate their own business. There is usually a much higher success rate when an individual opens
a franchise as opposed to a family-operated business, since a proven business formula is in place.
The functioning of this form of business is supported by a ‘franchise agreement’ which is the legal
document that binds the franchisor and franchisee together. One of the main ingredients of franchise
agreement is operations manual in which detailed guidelines that must be legally followed for operating
the business as outlined by the franchisor are stated. One of the most important advantages of buying a
franchise is that the entrepreneur does not have to incur all the risks associated with creating a new
business. Typically, the areas that entrepreneurs have problems with in starting a new venture are product
acceptance, management expertise, meeting capital requirements, knowledge of the market and operating
and structural controls. In franchising, the risks associated with each of the above-mentioned factors are
minimised through the franchise relationship and all these become advantages of franchising to the
franchise.

Q2. A legal document that binds the franchisor and franchisee together is known as: (1 Mark)
a. Mutual agency
b. Co-operative agreement
c. Franchise agreement
d. Partnership deed

Ans c. Franchise Agreement

Q3. The phrase ‘In business for yourself, but not by yourself’ means: (1 Mark)
a. A franchise form of business provides the individual Owner/Operator with independence to operate
their business.
b. A franchise form of business does not provide the individual Owner/Operator with any independence to
operate their business
c. A franchise form of business provides the individual Owner/Operator the necessary capital to operate
the business.
d. A franchise form of business is very complex as it requires a lot of capital investment by the franchisee.

Ans a. A franchise form of business provides the individual Owner/Operator with independence to operate
their business.
Q4. One of the main ingredients of the franchise agreement which details the guidelines that must be
legally followed in operating the business as outlined by the franchisor is known as: (1 Mark)
a. Proprietary Statement
b. Operations Manual
c. Contract Explanation
d. Field Manual

Ans b. Operations Manual

Q5. Which among the following is not a problem that is minimised in franchising business? (1 Mark)
a. Product acceptance
b. Management expertise
c. Cost advantage
d. Knowledge of the market

Ans c. Cost advantage

Q6. Which among the following is not an advantage of franchising to the franchisee? (1 Mark)
a. Cost advantage
b. Knowledge of the market
c. Management expertise
d. Capital requirement

Ans a. Cost advantage

Q7. State any two points of difference between internal expansion and external expansion. (2 Marks)

Ans Internal Expansion

(a) Results from the gradual increase in the activities of the concern.
(b) The company can expand its present production capacity by adding more machines or by replacing old
machines with the new machines with higher production capacity.
External Expansion
(a) Refers to business combinations where two or more business concerns combine and expand the
business activities.
(b) In the process of combination, two or more units engage its similar business or related process or
stages.

Q8. Explain any five reasons for Mergers and Acquisitions of business entities. (5 Marks)

Ans Reasons for Mergers and Acquisitions:

1. Synergy - Synergy is the most essential component of mergers. In mergers, synergy between the
participating firms determines the increase in value of the combined entity. It refers to the difference
between the value of the combined firm and the value of the sum of the participants. Synergy accrues in
the form of revenue enhancement and cost savings.
2. Acquiring new technology - To remain competitive, companies need to constantly upgrade their
technology and business applications. To upgrade technology, a company need not always acquire
technology. By buying another company with unique technology, the buying company can maintain or
develop a competitive edge.
3. Improved profitability - Companies explore the possibilities of a merger when they anticipate that it will
improve their profitability.
4. Acquiring a competency - Companies also opt for M&As to acquire a competency or capability that they
do not have and that the other firm does.
5. Entry into new markets - Mergers are often looked upon as a tool for hassle-free entry into new
markets. Under normal conditions, a company can enter a new market, but may have to face stiff
competition from the existing companies and may have to battle out for a share in the existing market.
However, if the merger route is adopted, one can enter the market with greater ease and avoid too much
competition.
6. Access to funds - Often a company finds it difficult to access funds from the capital market. This
weakness deprives the company of funds to pursue its growth objectives effectively. In such cases, a
company may decide to merge with another company that is viewed as fund-rich.
7. Tax benefits - Mergers are also adopted to reduce tax liabilities. By merging with a loss-making entity, a
company with a high tax liability can set off the accumulated losses of the target against its profits gaining
tax benefits.
(Any five points with proper explanation)

Q9. What is meant by Acquisition? Explain the four types of acquisitions. (5 Marks)

Ans Meaning - A corporate action in which a company buys most, if not all, of the target company's
ownership stakes in order to assume control of the target firm. It is the buying of one company by another.
There are four types of acquisitions:
1. Friendly acquisition: Both the companies approve of the acquisition under friendly terms. There is no
forceful acquisition and the entire process is cordial.
2. Reverse acquisition: A private company takes over a public company
3. Back flip acquisition: A very rare case of acquisition in which the purchasing company becomes a
subsidiary of the purchased company.
4. Hostile acquisition: The entire process is done by force. The smaller company is sometimes driven to a
situation where they are forced to sell themselves to a large company.
 CBSE 2022-23 All India Paper

Q1. When two companies that may not compete with each other but exist in the same supply chain merge,
it is known as: (1 Mark)
a. Horizontal merger
b. Vertical merger
c. Market extension merger
d. Product extension merger

Ans (b) Vertical merger

Q2. Assertion(A): Backflip acquisition is a rare case of acquisition in which the purchasing company
becomes a subsidiary of the purchased company.
Reason(R): Both the companies approve of the acquisition but the entire process is done by force.
Evaluate the statements given above and choose the most appropriate option from the following: (1 Mark)
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
b. Both Assertion (A) and Reason are true, but Reason (R) is not the correct explanation of Assertion (A).
c. Assertion (A) is true, but Reason (R) is false.
d. Assertion (A) is false, but Reason (R) is true.

Ans (c) Assertion (A) is true, but Reason (R) is false.

Q3. Merger between ‘Larsen and Toubro (L&T)’ with key business area in construction engineering and
manufacturing critical equipment and ‘Voltas limited’, an Indian multinational electronics company
specialized in manufacturing home appliances, whose business fields are totally unrelated, has taken place.
Identify and explain the type of merger between ‘Larsen and Toubro(L&T) and ‘Voltas Limited’. (2 Marks)

Ans Conglomerate
A merger between firms that are involved in totally unrelated business activities.
There are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms
with nothing in common, while mixed conglomerate mergers involve firms that are looking for product
extensions or market extensions.
(If the student has explained the meaning of conglomerate AND/OR types of conglomerates, marks may be
awarded in both the situation ONLY the types of conglomerates, answer given by the student must be
considered)

Q4. ‘Pretty You’ is an established brand in the salon and makeover industry. It is currently operating in
Delhi with a network of 5 branches. It now wants to make its presence known in different cities of North
India and gradually establish its identity throughout the country. For this, the company decides to give
exclusive rights to independent retailers to take advantage of the brand “Pretty You” in return for their
payment of royalties and conformance to standardized operating procedures. Identify and explain the form
of expansion discussed above. (3 Marks)

Ans (a) External expansion

External expansion refers to business combination where two or more concerns combine and expand their
business activities. In the process of combination, two or more units engage in similar business or related
process or stages. Sometimes stages of the same business join with a view to carry on their activities or
shape, their polices on common basis some other or in coordination for mutual benefit or maximum
profits.
The combination may be among competing units or units engaged in different processes. After
combination, the constituted firm pursues some common objectives or goals.
OR
(a) Franchising
Franchising is as "an arrangement whereby the manufacturer or sole distributor of a trademarked product
or service gives exclusive rights of local distribution to independent retailers in return for their payment of
royalties and conformance to standardized operating procedures".
The person offering the franchise is known as the franchisor. The franchisee is the person who purchases
the franchise and is given the opportunity to enter a new business.
They both enter into a Franchise Agreement. This agreement is the legal document that binds the
franchisor and franchisee together.
(Either of the two given answers can be accepted)

Q5. ‘Mergers and Acquisitions’ are inspired by a desire to diversity or achieve higher growth rate due to
varied reasons. Explain any five such reasons for mergers and acquisitions. (5 Marks)

Ans (a) Any five reasons for mergers and acquisitions.

1. Synergy: Synergy is the most essential component of mergers. In mergers, synergy between the
participating firms determines the increase in value of the combined entity. It refers to the difference
between the value of the combined firm and the value of the sum of the participants. Synergy accrues in
the form of revenue enhancement and cost savings.
2. Acquiring new technology: To remain competitive, companies need to constantly upgrade their
technology and business applications. To upgrade technology, a company need not always acquire
technology. By buying another company with unique technology, the buying company can maintain or
develop a competitive edge.
3. Improved profitability: Companies explore the possibilities of a merger when they anticipate that it will
improve their profitability.
4. Acquiring a competency: Companies also opt for M&A to acquire a competency or capability that they
do not have and which the other firm does.
5. Entry into new markets: Mergers are often looked upon as a tool for hassle-free entry into new
markets. Under normal conditions, a company can enter a new market, but may have to face stiff
competition from the existing companies and may have to battle out for a share in the existing market.
However, if the merger route is adopted, one can enter the market with greater comfort and avoid too
much competition.
6. Access to funds: Often a company finds it difficult to access funds from the capital market. This
weakness deprives the company of funds to pursue its growth objectives effectively.
7. Tax benefits: Mergers are also adopted to reduce tax liabilities. By merging with a loss-making entity, a
company with a high tax liability can set off the accumulated losses of the target against its profits gaining
tax benefits.
 CBSE 2022-23 Sample Paper

Q1. In the year 2012, the social media application “Chowpal” acquired “Socialite” at a purchase value of $1
billion. Both the entities operated in the social media industry and offered similar products as part of their
photo-sharing services. However, Chowpal intended to further bolster its market position in the social
media space, and the acquisition of Socialite exactly fitted in its scheme of the plan. The merger eventually
helped Chowpal in increasing its market share, eliminating competition, and gaining access to a wider
audience. Identify the type of merger: (1 Mark)
a. Vertical merger
b. Horizontal merger
c. Market extension merger
d. Product extension merger

Ans b. horizontal merger

Q2. Assertion (A): In franchising there is usually a much higher likelihood of success when an individual
opens a franchise as opposed to a mom-and-pop business.
Reason (R): It runs on a proven business formula that is already in place. (1 Mark)
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b. Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A)
c. Assertion (A) is true but Reason (R) is false.
d. Assertion (A) is false but Reason (R) is true.

Ans a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)

Q3. The merger of Techno Fit and Let’s Konnect was due to the rising competition with Arihant Tech . The
market was slowly captured by Arihant Tech, due to its policy of providing free service in the first 6
months. Both Techno Fit and Let’s Konnect couldn't stand the price war between the companies in the
telecom sector and decided to come together so as to increase their market share. This strategy helped
them in cost saving through economies of scale as they could cover more areas now. It led to the overall
growth of both the companies.
Identify and explain the growth strategy adopted above by the telecom operators, Techno Fit and Let’s
Konnect. (2 Mark)

Ans The telecom operators adopted a market extension merger strategy.

Market extension merger strategy: is a type of merger that takes place between two companies that deal
in the same products but in separate markets. The main purpose of this type of merger is to make sure that
the merging companies can get access to a bigger market and that ensures a bigger client base.

Q4. Varied reasons are cited by firms for joining hands with another company to enhance their growth.
Analyse any two reasons for the same. (2 Marks)

Ans 1. Synergy
2. Acquiring new technology
3. Improved profitability
4. Acquiring a competency
5. Entry into new markets
6. Access to funds
7. Tax benefits
(Explain any two in detail)
Q5. Kavita started a boutique named “Stylo Queens”. She replaced old sewing machines with the new
one’s during the pandemic to manufacture masks and PPE kits. Gradually her boutique became popular
and seeing the swelled-up demand for her products she further installed extra machines to cater to the
growing demand of the increasing customers. From the profits earned, she decided to further expand the
business by starting a new business of cushion covers and bed sheets.
1. Identify the type of expansion mentioned above.
2. What is the net result of such an expansion?
3. Explain the expansion discussed above. (3 Marks)

Ans 1. The type of expansion mentioned is internal expansion.

2. The net result of internal expansion is the increase in business activities and broadening the present
capital structure.
3. Internal expansion: It is a slow and time-consuming process which is a result of a gradual increase in the
activities of the enterprise.

Q6. Franchising is advantageous for both franchisor and franchisee. Explain five advantages of franchising
for the franchisee. (5 Marks)

Ans The advantages of franchising for the franchisee are as follows:

1. Product acceptance: The franchisee usually enters into a business that has an accepted name, product
or service. He/she doesn’t have to spend resources to establish the credibility of the business and create a
market for his product. The credibility already exists based on the years the franchise has existed.
2. Management expertise: Managerial expertise is provided to the franchisee. Each new franchisee is often
required to take a training program on all aspects operating the franchise. This training could include
classes in accounting, personnel management, marketing and production.
3. Capital requirements: Franchise offers an opportunity to start a new venture with up-front support from
franchisor, which saves considerable time and capital of the franchisee.
4. Knowledge of the market: Franchisors are well aware of the existing market conditions. With their
experience and knowledge, they can provide advice and assistance to the franchisees for carving out a
market for themselves.
5. Operating and structural controls: Two problems that many entrepreneurs have in starting a new
venture are maintaining quality control of products/services and establishing effective managerial controls.
The franchisor helps the franchisee to combat both the problems.
 CBSE 2021-22 Compartment Paper

Q1. How is effective operational control maintained by a franchisor in a franchise? State by giving any two
points. (2 Marks)

Q2. Iceberg Foods Ltd. has a bottling plant of producing flavoured milk. It produces different varieties of
flavoured milk ranging from Vanilla to Kesar Pista. The company has its own dairy farms for supply of fresh
milk. The labels that are affixed on the bottles are supplied by C2X Graphics. Glass Bottles are supplied by
Bharat Glass Works. Caps for the bottles and crates are supplied by Pune Plastics. 70% of the total business
of Bharat Glass Works and Pune Plastics is with Iceberg Foods.
To create a better supply chain, Iceberg Foods merged its operations with Bharat Glass Works and Pune
Plastics.
(a) Identify and explain the type of merger that took place between the three companies.
(b) Also, identify the type of synergy that would be created by this merger. (2 Marks)

Q3. Growth is always essential for the existence of a business concern. In the light of given statement,
explain any three indicators of internal expansion for an organisation. (3 Marks)

Q4. KK Ltd. has been in the field of manufacturing beauty products for the past 15 years. The company is
using herbal ingredients to manufacture all its products. In recent times the company is facing a tough
competition from another predominant brand-named Eco Grocery Ltd. It is a small-scale company and
used superior quality ingredients for producing its organic based products. The managing director of KK
Ltd. Naresh, tried to negotiate terms with Eco Grocery Ltd. to make it a part of KK Ltd. but failed. He then
started to buy the shares of Eco Grocery Ltd. and eventually, gained control over the management of the
company and made it a part of KK Ltd.
On the basis of above information answer the following questions:
(a) Identify the growth strategy adopted by KK Ltd.
(b) Explain the type of growth strategy used by Naresh identified in (a) above.
(c) Describe any three reasons of making Eco Grocery Ltd a part of KK Ltd. by Naresh. (5 Marks)
 CBSE 2021-22 All India Paper

Q1. Give the meaning of a ‘Franchise Agreement’. (2 Marks)

Ans A franchise agreement is a legal document that binds the franchisor and franchisee together. This
document explains what the franchisor expects from the franchisee in running the business.

Q2. Oorja and KTC Wifi are two broadband provider companies operating in South – East Delhi. Both are
close competitors and have developed their strong customer base over the years. The COVID – 19
pandemics made the offices and schools switch their customer base online. Just then a multinational
service provider company, Storex BB, entered the market and launched its service at a much cheaper price
with better connectivity. To counter the threat posed by the company Storex BB, both companies Oorja
and KTC Wifi decided to consolidate their business.
(a) Identify the enterprise growth strategy adopted by Oorja and KTC Wifi.
(b) Sate the type of growth strategy identified in part (a) above.
(c) Give the goal of the type of growth strategy as stated in part (b) above (2 Marks)

Ans (a) Enterprise Growth Strategy - Merger

(b) Type—Horizontal merger, i.e., the merger occurring between companies in the same industry offering
the same goods or services.
(c) The goal of a horizontal merger is to create a new larger organisation with more market share.

Q3. Explain ‘Synergy’ as a reason for ‘Mergers’ and ‘Acquisitions’ (3 Marks)

Ans Synergy:
(a) It is the most essential component of mergers.
(b) Synergy between the participating firms determines the increase in the value of combined entity.
(c) It refers to the difference between the value of the combined firm and the value of the sum of the
participants.
(d) It occurs in the form of revenue enhancement and cost savings.
(Any three)

Q4. ‘Kapoor Merrytime Ltd.’ Is a renowned name in naturally flavoured ice-creams made from fresh fruits
and edible vegetables. The company has its presence in Maharashtra and Goa. Its ice – creams sell under
the brand name ‘Satvika’. The company has a strong foothold in Maharashtra but is struggling for success
in the Goa market. The reason is the presence of a successful local brand by ‘Pastle Ice- creams Ltd. In the
market. ‘Pastle Ice-creams Ltd.’ Is selling natural ice-creams with locally preferred flavours.
‘Kapoor Merrytime Ltd.’ tried to negotitate its way but because of the goodwill of ‘Pastle Ice-creams Ltd.’,
it could not succeed in its efforts. Frustrated, ‘kapoor Meerytime Ltd.’ started buying the shares of ‘Pastle
Ice – creams Ltd.’ to gain control over the management of ‘Pastle Ice – creams Ltd.
(a) Identify and explain the type of business combination adopted by ‘Kapoor Merrytime Ltd.’ as its growth
strategy in the Goa market.
(b) Explain any two advantages which ‘Kapoor Merrytime Ltd.’ would have by adopting its designed
strategy. (5 Marks)

Ans (a) Acquisition: A corporate action in which a company buys most, if not all, of the target company's
ownership stakes in order to assume control of the target firm.
(b) Advantages (any two):
(i) Synergy - synergy between the participating firms determines the increase in value of the combined
entity. It accrues in the form of revenue enhancement and cost savings.
(ii) Improved Profitability - Companies explore the possibilities of a merger when they anticipate that it
will improve their profitability.
(iii) Entry into new market - A company can enter a new market, but may have to face stiff competition
from the existing companies and may have to battle out for a share in the existing market. However, if the
merger route is adopted, one can enter the market with greater case and avoid too much competition.
(Any two with proper explanation)

(If the examinee has not identified ‘Acquisition’ but has identified it as one of the types of acquisition no
marks to be awarded. 1 ½ marks for explaining the term ‘Acquisition’. Due credit should be given even if
the explanation mentions ‘Hostile acquisition’).

(Only the above-mentioned points to be considered as per the given case study; no other points from the
book to be considered)
 CBSE 2021-22 Sample Paper Term 2

Q1. Anil signed a contract with Phelari group to bottle and distribute their soft drink brand ‘Kickapo’. The
taste of this soft drink was unique and it became the most preferred soft drink consumed by teenagers.
The agreement stated that Anil should use the same ingredients used by Phelari group while bottling the
product. Identify and give the meaning of this type of enterprise growth opportunity. (2 Marks)

Ans Manufacturing franchise opportunity: These types of franchises provide an organization with the right
to manufacture a product and sell it to the public, using the franchisor's name and trademark.

Q2. What is operating synergy? How is it different from financial synergy? (2 Marks)

Ans Operating synergy refers to the cost savings that come through economies of scale or increased sales
and profits. It leads to the overall growth of the firm.
Financial synergy is the direct result of financial factors such as lower taxes, higher debt capacity or better
use of idle cash.

Q3. Elaborate on any three types of mergers? (3 Marks)

Ans a. Conglomerate: A merger between firms that are involved in totally unrelated business activities.
There are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms
with nothing in common, while mixed conglomerate mergers involve firms that are looking for product
extensions or market extensions.
b. Horizontal merger: A merger occurring between companies in the same industry. Horizontal merger is a
business consolidation that occurs between firms which operate in the same space, often as competitors
offering the same goods or service.
c. Market extension mergers: A market extension merger takes place between two companies that deal in
the same products but in separate markets. The main purpose of the market extension merger is to make
sure that the merging companies can get access to a bigger market and that ensures a bigger client base.
d. Product extension mergers: A product extension merger takes place between two business
organizations that deal in products that are related to each other and operate in the same market. The
product extension merger allows the merging companies to group together their products and get access
to a bigger set of consumers. This ensures that they earn higher profits.
e. Vertical merger: A merger between two companies producing different goods or services for one
specific finished product. A vertical merger occurs when two or more firms, operating at different levels
within an industry's supply chain, merge operations. (Any three)

Q4. Read the following article from a Business Newspaper and answer: (5 Marks)
“Fone India Ltd. is the second largest mobile network operator in India by subscriber base, after Virel.
Huber Evel Ltd (HEL) was another leading mobile operator in India. In the year 2007, Fone India Ltd.,
acquired a 52 % stake in HEL. Fone India’s main motive in going in for the deal was its strategy of
expanding into emerging and high growth markets which will lead to improved profitability in the
business.”
a. Quoting the lines from the passage identify and explain reasons for taking up a stake by Fone India Ltd.,
b. Also explain any three reasons apart from the one identified in part (a).

Ans a. “deal was its strategy of expanding into emerging and high growth markets” - Entry into new
markets: a company can enter the market avoiding too much competition.
“lead to improved profitability in the business” - Improved profitability: The acquisition will lead to
increased profits for the firm.
b. Synergy - synergy between the participating firms determines the increase in value of the combined
entity.
Acquiring new technology - By buying another company with unique technology, the buying company can
maintain or develop a competitive edge.
Acquiring a competency - To acquire a competency or capability that they do not have.
Access to funds - The newly acquired company can be cash rich which will help both the firms.
Tax benefits - If a loss-making company is being acquired, it can lead to reduced tax liabilities. (Any three)
 CBSE 2020-21 Sample Paper

Q1. Given below are types of mergers with examples of each. Match them correctly. (1 Mark)

Column A - Types of Mergers Column B - Examples

i. Vertical Merger a. A watch manufacturer acquiring a cement manufacturer
ii. Market Extension merger b. Bank of Madura merged with ICICI Bank
iii. Conglomerate c. A textile company acquires a cotton yarn manufacturer
iv. Horizontal Merger d. Hindustan Unilever Company acquired Lakme, it helped HUL to
enter the cosmetics market

A. i-a, ii-b, iii- c, iv-d

B. i-c, ii-d, iii- a, iv-b
C. i-a, ii-c, iii- b, iv-d
D. i-c, ii-b, iii- a, iv-d

Ans B. i-c, ii-d, iii- a, iv-b

Q2. What is common among McDonalds, Goli vada pav, Naturals Ice-creams and Ferns-and-petals? (1
Mark)
A. All are Multinational corporations working in India.
B. All have adopted franchising as their growth strategy.
C. All have merged with big companies.
D. All of the above

Ans B. All have adopted franchising as their growth strategy.

Q3. Both mergers and acquisitions are enterprise growth strategies but how they come into existence
makes them different from each other. Which of the given statements below justifies the given statement?
A. Merger is always friendly, whereas acquisition is always hostile.
B. Merger may be friendly, whereas acquisition is always hostile.
C. Merger is always depending on synergy, whereas acquisition is never based on synergy.
D. Merger is consensual, whereas acquisition is forced.

Ans D. Merger is consensual, whereas acquisition is forced.

 CBSE 2019-20 Compartment Paper

Q1. ABC Private Limited are the manufacturers of leather shoes only for specially-abled children up to the
age of twelve years. It took over XYZ Ltd who are the manufacturers of shoes for all age groups. Which of
the following types of acquisition is this? (1 Mark)
(A) Friendly acquisition
(B) Reverse acquisition
(C) Backflip acquisition
(D) Hostile acquisition

Q2. Explain the main ingredients of a franchise agreement. (4 Marks)

Q3. Explain the different types of added value that a business can employ to improve its products and
services. (4 Marks)
 CBSE 2019-20 Delhi Paper

Q1. State whether the following statement is true or false: (1 Mark)

In a Reverse acquisition a public company takes over a private company.

Ans False

Q2. The footwear industry in India is dominated by ‘B- relax Footwear’. ‘B- relax Footwear’ procures 70% of
its raw material from ‘Polymers Ltd’. The major production of ‘Polymers Ltd. is plastic chips, PU foam and
elastic which is used by ‘B-relax Footwear’ in its manufacturing processes. After due diligence, they decide
to merge with each other. If they merge, ‘B-relax Footwear’ doesn’t need to look for a vendor and sourcing
raw materials would be seamless. On the other hand, as a result of the merger, ‘Polymers Ltd.’ doesn’t
need to worry about the sales and marketing. All they need to do is to improve their processes to produce
better raw materials for ‘B-relax Footwear’. After the merger the combined entity will be known as ‘B-relax
Inc’.
(i) Identify and explain the type of merger between ‘B- relax Footwear’ and ‘Polymers Ltd.’
(ii) Why is due diligence required before merger?
(iii) Which is the most dominant reason for this merger? Explain. (3 Marks)

Ans i) Vertical Merger: A vertical merger occurs when two or more firms, operating at different levels
within an industry's supply chain, merge operations
ii) To ensure that the deal is beneficial to both the parties
iii) Synergy: Synergy between the participating firms determines the increase in value of the combined
entity.

Q3. Explain with the help of any four points the advantages of franchising to the franchisee. (4 Marks)

Ans Advantages of franchising to the franchisee: -

1. Product acceptance: The franchisee usually enters into a business that has an accepted name, product
or service.
2. Management expertise: Once the franchise has been started, most franchisors will offer managerial
assistance on the basis of need. Toll-free numbers are also available so that the franchisee can ask
questions anytime.
3. Capital requirements: The layout of the facility, control of stock and inventory and the potential buying
power of the entire franchise operation can save the entrepreneur significant funds.
4. Knowledge of the market: Any established franchise business offers the entrepreneur years of
experience in the business and knowledge of the market which is usually reflected in a plan offered to the
franchisee that details the profile of the target customer and the strategies that should be implemented
once the operation has begun.
5. Operating and structural controls: Administrative controls unusually involve financial decisions related
to costs, inventory and cash flow and personnel issues such as criteria for hiring/firing, scheduling and
training to ensure consistent service to the customer.
(ANY FOUR)

Q4. Explain Internal expansion and External expansion as part of growth and development of an
Enterprise. (4 Marks)

Ans Internal expansion results from the gradual increase in the activities of the concern. The concern may
expand its present production capacity by adding more machines or by replacing old machines with the
new machines with higher productive capacity.
External expansion or business combination refers to business combination where two or more concerns
combine and expand their business activities. External expansion may be in the following forms:
a) Franchising
b) Mergers
c)Acquisitions

Q5. Explain any six reasons for the failure of mergers and acquisitions. (6 Marks)

Ans Reasons for failure of merger and acquisitions: -

1. Unrealistic price paid for target: The process of M&A involves valuation of the target company and
paying a price for taking over the assets of the company.
2. Difficulties in cultural integration: there may be acute contrasts between the attitudes and values of the
two companies, especially if the new partnership crosses national boundaries.
3. Overstated synergies: Mergers and acquisitions are looked upon as an important instrument for
creating synergies through increased revenue, reduced costs and reduction in networking capital and
improvement in the investment intensity. Overestimation for these can lead to failure of mergers.
4. Integration difficulties: Companies very often face integration difficulties, i.e., the combined entity have
to adapt to a new set of challenges given by the changed circumstances.
5. Poor business fit: Mergers and acquisitions also fail when the products or services of the merging
entities do not naturally fit into the acquirer's overall business plan. This delays efficient and effective
integration and causes failure.
6. Inadequate due diligence: It helps in detecting financial and business risks that the acquirer inherits
from the target company. Inaccurate estimation of the related risk can result in failure of the merger.
7. High leverage: To pay the price of acquisition, the acquirer may borrow heavily from the market. This
creates a very high leveraged structure and increases the interest burden of the company.
8. Boardroom split: When a merger is planned, it is crucial to evaluate the composition of the boardroom
and compatibility of the directors. Managers or directors who are suddenly deprived of authority can be
particularly bitter.
9. Regulatory issues: The entire process of merger requires legal approvals. If any of the stakeholders are
not in favour of the merger, they might create legal obstacles and slow down the entire process.
10. Human resources issues: A merger or acquisition is identified with job losses, restructuring and the
imposition of a new corporate culture and identity. This can create uncertainty, anxiety and resentment
among the company's employees.
(ANY SIX)
 CBSE 2019-20 All India Paper

Q1. Giving any two reasons, explain how franchising is a viable option for the growth of start-up firms. (2
Marks)

Ans 1. Franchising offers startups an established product in the market for a royalty which helps them.
2. Startups take up training to understand the product and franchisors make franchises fully conversant
with the product/services that they have to offer for a fee. It is very important that the Sales-man must
know his/her product. In this case, start-ups are the sales person.
3. The start-ups can grow fast without having to increase labour, operating costs and blocking running
expenses because normally buyers straight walk up to them.
4. In practical Franchises work for the benefit of franchisors.
(Any Two Reasons)

Q2. Explain any four reasons for failure of merger and acquisition. (4 Marks)

Ans Reasons for failure of Merger and Acquisitions (M & A) are as follows:
1. Unrealistic price paid for target: The process of M&A involves valuation of the target company and
paying a price for taking over the assets of the company.
2. Difficulties in cultural integration: Every merger involves combining of two or more different entities.
These entities reflect different corporate cultures, styles of leadership, differing employee expectations
and functional differences.
3. Overstated synergies: Mergers and acquisitions are looked upon as an important instrument for
creating synergies through increased revenue, reduced costs and reduction in networking capital and
improvement in the investment intensity. Overestimation for these can lead to failure of mergers.
4. Integration difficulties: Companies very often face integration difficulties, i.e., the combined entity has
to adapt to a new set of challenges given by the changed circumstances.
5. Poor business fit: Mergers and acquisitions also fail when the products or services of the merging
entities do not naturally fit into the acquirer's overall business plan.
6. Inadequate due diligence: Due diligence is a crucial component of the M&A process as it helps in
detecting financial and business risks that the acquirer inherits from the target company.
7. High leverage: One of the most crucial elements of an effective acquisition strategy is planning how one
intends to finance the deal through an ideal capital structure. The acquirer may decide to acquire the
target through cash. To pay the price of acquisition, the acquirer may borrow heavily from the market. This
creates a very high leveraged structure and increases the interest burden of the company.
8. Boardroom split: When a merger is planned, it is crucial to evaluate the composition of the boardroom
and compatibility of the directors.
9. Regulatory issues: The entire process of merger requires legal approvals. If any of the stakeholders are
not in favour of the merger, they might create legal obstacles and slow down the entire process.
10. Human resources issues: A merger or acquisition is identified with job losses, restructuring and the
imposition of a new corporate culture and identity. This can create uncertainty, anxiety and resentment
among the company's employees. These HR issues are crucial to the success of M&As.
(Any four points)

Q3. Explain any four requirements for ‘Value Chain Management’. (4 Marks)

Ans 1. Coordination and collaboration: To increase efficiency within an organization, coordination and
collaboration is essential. Coordinate work groups to ensure efforts are not duplicated.
2. Technology investment: Technology plays a large role in manufacturing and distribution. With
outdated technology, such as old computers or machinery.
3. Organizational process: In value chain management, every aspect of an organization's process is
identified.
4. Leadership: Strong leaders are crucial to the success in value chain management. Good leaders earn the
respect of their employees through sound management practices.
5. Employee/human resources: A central hub of information on benefits, company policies, hiring and
conflict management is also necessary for a corporation to function properly.
6. Organizational culture and attitudes: Organizations that foster strong cultural identity with positive
attitudes tend to attract and retain top employees. Regular corporate sponsored activities are suggested to
help build cultural unity and keep attitudes positive while boosting productivity.
(Any Four)
 CBSE 2019-20 Sample Paper

Q1. State whether the following statement is ‘true’ or ‘false’. (1 Mark)

During mergers and acquisitions the value of the combined entity is expected to be greater than the sum
of the independent values of the merging firms.

Ans True

Q2. Differentiate between internal expansion and external expansion. (4 Marks)

Ans Internal Expansion

1. Internal expansion results from the gradual increase in the activities of the concern.
2. The concern may expand its present production capacity by adding more machines or by replacing old
machines with the new machines with higher productive capacity.
3. The internal expansion can also be undertaken by taking up the production of more units or by entering
new fields on the production and marketing sides. Internal expansion may be financed by the issue of more
share capital, generating funds from old profits or by issuing long–term securities.
4. The net result of internal expansion is the increase in business activities and broadening the present
capital structure.

External Expansion
1. External expansion refers to business combination where two or more concerns combine and expand
their business activities.
2. In the process of combination, two or more units engage in similar business or related process or stages.
3. Sometimes stages of the same business join with a view to carry on their activities or shape, their
policies on common basis some other or in coordination for mutual benefit or maximum profits.
4. The combination may be among competing units or units engaged in different processes. After
combination, the constituted firm pursues some common objectives or goals.
 CBSE 2018-19 Compartment Paper

Q1. ‘FitNsure Ltd.’ introduced an alternate to aerated drinks in the form of soya milk with different flavours
in order to give a healthy option for soft drink. Identify the type of added value by the company. (1 Mark)

Q2. How does ‘Porter’s value chain’ create competitive advantage for an organization? (2 Marks)

Q3. ‘‘Business adds value to goods and services by modifying them in a particular way to create a new
product for greater value to customers.’’ This added value is different from financial and marketing
perspective. State how. (3 Marks)

Q4. Explain the main ingredients of a franchise agreement. (4 Marks)

Q5. Explain any four reasons for mergers and acquisition. (4 Marks)
 CBSE 2018-19 Delhi Paper

Q1. Since long ‘Milkman Diary’’ was into distribution of milk through its milkmen daily morning. With the
change in times, it started to sell its milk in tetra packs to maintain hygiene of the product. Also, the
surplus milk was converted into cheese and butter in its mechanized processing plant. Identify the value
added. (1 Mark)

Ans Quality added value

Q2. ‘Keebock’ and ‘KT Shoes’ were two well-known brands in the shoe industry in India. With advancement
of technology, sophisticated machines were available in the market to increase the quality and quantity of
shoes manufactured. Himanshu, who was running a shoe manufacturing business under the brand name
‘Keebock’, contacted KT shoes, to purchase a sophisticated German machine. KT shoes agreed and a new
automatic machine was imported jointly by them from Germany for producing shoes with the latest
technology. It not only enhances the quality and quantity of shoes manufactured but also, the goodwill of
the business. They also hired a trainer from Germany to procure technical knowledge about the use of the
machine.
In the above para, a series of activities were done to create and build value to the shoes manufactured at
every step and to improve company’s processes. Quoting the lines from the above para, state any two
ways used by ‘Keebock’ and ‘KT shoes’ to improve company’s processes. (2 Marks)

Ans a. ‘to purchase a sophisticated German machine’’- Technological development-use of technology to

obtain a competitive advantage.
b. ‘They also hired a trainer from Germany to procure technical knowledge about the use of the machine’-
HR management- to recruit, train and develop the right people for the organization to be successful

Q3. ‘Winber Motors Ltd.’ was a car dealer. It took over a car manufacturing plant ‘speedcart & Co. and
started a new business in the name of ‘Uniquecart Ltd.’ to synergise and capture a major share of the
market and to maximize their profits. Like their competitors, they decided to sell their cars through
company appointed dealers (retailers) in various parts of the country. This type of distribution network will
enable the company to retain control over the distribution process.
(a) Identify and explain the type of expansion.
(b) Also, explain the form of the type of expansion identified in (a) above. (3 Marks)

Ans (a) External Expansion- External expansion refers to business combination where two or more
concerns combine and expand their business activities.
(b) Acquisition- It could be acquisition of control, leading to takeover of a company. It could be acquisition
of tangible assets, intangible assets, rights and other kinds of obligations. They could also be independent
transactions and may not lead to any kind of takeovers or mergers.

Q4. Explain how does franchising help Start-ups? (4 Marks)

Ans 1. Franchising help startups because already the product carriers a name in the market already which
is the most difficult part of business to establish.
2. Startups take up training to understand the product and franchisors make franchises fully conversant
with the product/services that they have to offer.
3. The start-ups can grow fast without having to increase labour, operating costs and blocking running
expenses because normally buyers straight walk up to them.
4. Franchisors' efforts to boast their franchises are always sincere, so there is no–clash of interest.
Q5. Explain any four requirements for value chain management. (4 Marks)

Ans Coordination and collaboration

Technology investment
Organisational process
Leadership
Employee/human resources
Organisational culture and attitudes
(Any four points with explanation)
 CBSE 2018-19 All India Paper

Q1. ‘First School Ltd’. is an acclaimed infrastructure development company. It designs the buildings for
educational institutions in a unique way to give the maximum benefits of nature to the different
stakeholders in the institution. Generally, the buildings have been designed by them in such a way that
during the day maximum sunlight is utilized and solar panels conserve solar energy for the rest of the day.
This helps to conserve electricity and reduce the electricity bill. Identify the type of value added by ‘First
School Ltd.’. (1 Mark)

Ans Environmental added Value

Q2. Kamal Ltd. are manufactures of textiles, having their plant in Surat, a city of Gujarat. Vastra Ltd. are the
manufactures of readymade garments and sell their products throughout the country. They also export
their products to America and European countries. Vastra Ltd. source their textiles from Kamal Ltd. The
management of the two companies decided to merge to have economies of large-scale production.
(a) Identify the type of merger entered into by Kamal Ltd. and Vastra Ltd.
(b) Also, explain a type of merger other than the one identified in (a) above. (2 Marks)

Ans a) Vertical Merger

b) (any one)
Conglomerate: A merger between firms that are involved in totally unrelated business activities.
Horizontal merger: A merger occurring between companies in the same industry.
Market extension mergers: A market extension merger takes place between two companies that deal in
the same products but in separate markets.
Product extension mergers: A product extension merger takes place between two business organizations
that deal in products that are related to each other and operate in the same market.

Q3. Beta Ltd. is a steel manufacturing company having its headquarters at Mumbai. It is the tenth largest
steel manufacturing company of the world. Gama Ltd. are also steel manufacturers with their
headquarters in Rangoon, the capital of Myanmar. For a long period, the company (Gama Ltd) had been
facing workers unrest and it decided to sell its business to an international bidder. The highest bid for this
was made by Beta Ltd. for Rs. 10 lakh crores. Afterwards Beta Ltd. realized that the assets of Gama Ltd.
were overvalued and liabilities were under–assessed and hence the price paid by them was higher. The
employees of the two entities have different corporate cultures and styles of leadership which led to the
problem of co-ordination. Ultimately Beta Ltd. had to close its business.
(a) Identify the growth strategy adopted by Beta Ltd.
(b) Quoting lines from the above paragraph, explain any two reasons for the failure of Beta Ltd. after it
took over the business of Gama Ltd. (3 Marks)

Ans a) Acquisition
b) Reasons for failure of Beta Ltd :
I. Unrealistic Price paid : The process of M&A involves valuation of the target company and paying a price
for taking over the assets of the company.
Lines : “The assets of Gama Ltd. …………….higher.”
II. Difficulty in the cultural integration:
Every merger involves combining of two or more different entities. These entities reflect different
corporate cultures, styles of leadership, differing employee expectations and functional differences.
Lines: The employees ………….co-ordination
Q4. Explain any four advantages of franchising to a franchisee? (4 Marks)

Ans Advantages to the franchisee (Any four)

1. Product acceptance
2. Management expertise
3. Capital requirements
4. Knowledge of the market
5. Operating and structural controls

Q5. Explain the different types of franchising. (4 Marks)

Ans Types of franchising:

1. Product franchise business opportunity.
2. Manufacturing franchise opportunity.
3. Business franchise opportunity ventures.
4. Business format franchise opportunity.
 CBSE 2018-19 Sample Paper

Q1. Victory Ltd., set up their small manufacturing unit producing bucket seat covers in the name of
‘Comfy’. The product was a great hit. After sometime, SMW- market leaders in luxury car manufacturing
planned to join hands with Victory Ltd. Such a deal will allow SMW to obtain better pricing and control over
the manufacturing process. Identify this type of growth strategy. (1 Mark)

Ans Vertical merger

Q2. Fitness Ltd., a leading manufacturer of athletic shoes decided to join together with Fizz Up, an energy
drink manufacturing company especially for sports people. The new company, Fitness Up, would help the
existing companies to extend their markets as goodwill of both would be encashed. Identify this type of
relationship. (1 Mark)

Ans Product extension merger

Q3. ‘Kindercare’ is a successful brand name in the field of playschool across the country. They decided to
increase the number of branches all throughout the country. For this purpose, they decided to give
exclusive rights to individuals in return for a regular payment. The various conditions included were:
a. Interested individuals need to have Minimum 2000 feet area and are ready to invest around 10,00,000.
b. Books and uniform to be procured from Kindercare headquarters only.
c. Content, technical and accounting assistance would be provided.
d. Teacher training for a month.
Identify and explain this type business opportunity offered by ‘Kindercare’. (2 Marks)

Ans Business format franchise opportunity- In this approach, a company provides a business owner with a
proven method for operating using the name and trademark of the company. The company also provides
significant amount of assistance.

Q4. TCW is a leading cool drink manufacturing company headquartered in Delhi. They decided to allow
various vendors the opportunity to manufacture and sell their products in various parts of the country. The
company will provide the raw materials for manufacturing the cool drink. Identify and explain this type of
business opportunity offered by ‘TCW’. (2 Marks)

Ans Manufacturing franchise opportunity:

It provides an organization with the right to manufacture a product and sell it in the public, using the
franchisor’s name and trademark.

Q5. What are the different types of acquisition? (4 Marks)

Ans There are four types of acquisitions:

a. Friendly acquisition: Both the companies approve of the acquisition under friendly terms. There is no
forceful acquisition and the entire process is cordial.
b. Reverse acquisition: A private company takes over a public company.
c. Back flip acquisition: A very rare case of acquisition in which the purchasing company becomes a
subsidiary of the purchased company.
d. Hostile acquisition: The entire process is done by force. The smaller company is either driven to such a
condition that it has no option but to say yes to the acquisition to save its skin or the bigger company just
buys off all its share, thereby establishing majority and hence initiating the acquisition.
Q6. The villagers of Jamawar have been known for ages for rearing cows. Farmers have been selling milk to
nearby villages. Renu studied up to grade XII in the village school and when she passed her exams with
flying colours her parents sent her to the nearby city for undergraduate course. While studying there she
noticed that the food habits of people were changing and cheese was used in many products. After
finishing her degree, she went back to her village and met the sarpanch. She explained to him the demand
for cheese and if a small-scale unit is established in the village to convert milk into cheese, it might benefit
the entire community. Taking her advice, the sarpanch found out the process of turning milk into cheese.
Accordingly, they set up a unit in the village with help from the Government authorities. The farmers
together decided to run the unit and use ecofriendly methods of production and packaging. They decided
to brand their product by the name, “Organica Cheese”. They also thought of setting aside 2% of the
profits for the establishing health centers for villagers. Keeping in mind the above facts, state the sentence
from the case study and explain the types of added value. (3 Marks)

Ans a. Quality added value- ‘Brand their product by the name, ‘Organica Cheese’. - It is basically adding
convenience, ease of use or other desirable characteristics that customers value
b. Cause related value- ‘setting aside 2 % of the profits for the health issues’- it is a social marketing
strategy where business contributes part of the revenue for a cause.
c. Environmental added value- ‘ecofriendly methods of production and packaging’- employ methods or
systems that do not harm the society.

Q7. Business add values to goods and services by modifying them in a particular way to create a new
product for greater value to customers. Comment on the concept of value addition from financial and
marketing perspective. (3 Marks)

Ans Business add values to goods and services by modifying them in a particular way to create a new
product of greater value to customers.
Added value, from a financial point of view, represents the difference between the value of goods and
services that are used as inputs to a production process and the value of the outputs of that process.
Added value, from a marketing perspective, means adding value that turns a commodity into a branded
product. Branded products and services can also have value added by enhancing their design,
characteristics or range of features.
 CBSE 2017-18 All India Paper

Q1. State any four primary activities that are essential for a firm to have a competitive advantage as given
by Porter. (4 Marks)

Ans Primary activities

Inbound logistics: Goods being obtained from the organisation's suppliers and to be used for producing
the end product.
Operations: Raw materials and goods are manufactured into the final product. Value is added to the
product at this stage as it moves through the production line.
Outbound logistics: Once the products have been manufactured, they are ready to be distributed to
distribution centres, wholesalers, retailers or customers. Distribution of finished goods is known as
outbound logistics.
Marketing and sales: Marketing must make sure that the product is targeted towards the correct customer
group. The marketing mix is used to establish an effective strategy, any competitive advantage is clearly
communicated to the target group through the promotional mix.
Services: After the product/service has been sold, what support services does the organization offer
customers? This may come in the form of after sales training, guarantees and warranties.
(Any four)

Q2. Infotics ltd. has been a socially responsible organization determined to reduce waste production and
do waste management. The company runs a low-cost canteen for its employees. It uses the available waste
in form of vegetable peels, fruit skin and unused food is left during the day is put for composting. The
methane gas so produced from this is used as fuel in the kitchen. This saves the fuel resources.
a. Identify the type of ‘added value’ in this process.
b. Briefly explain any other type of ‘added value’ besides the one identified in (a) above.
c. Also state any two values communicated by Infotics Ltd. to the society. (4 Marks)

Ans a. Environmental added value

b. 1. Quality added value
Quality added value is basically adding convenience, ease of use or other desirable characteristics that
customers value. For example, turning a commodity into a branded product or design enhancements like
pull tabs for easy opening or sipper tops on beverage bottles.
2. Cause-related added value
Cause-related added value is a social marketing strategy where business contributes part of the revenue
from a product or service to a cause. For example, a business may donate a percentage of revenue from
each transaction to a cause such as an educational facility for disadvantaged children or a wildlife
sanctuary.
3. Cultural added value
Cultural added value is also a social marketing strategy that employs methods or systems of production
involving cultural aspects or allow for the needs and sensitivities of cultural groups. For example, producing
kosher food (in accord with Jewish law) or using a combination of English and the language of other ethnic
groups in a community in written communications.
(Any one)
c. Social responsibility, Concern for the community
(Any other related value as per the question)
 CBSE 2017-18 Sample Paper

Q1. Explain any two advantages and two disadvantages of franchising to franchisee. (4 Marks)

Ans Advantages: (Any two)

a. Product acceptance: The franchisee usually enters into a business that has an accepted name, product
or service. The franchisee does not have to spend resources trying to establish the credibility of the
business. That credibility already exists based on the years the franchise has existed.
2. Management expertise: Another important advantage to the franchisee is the managerial assistance
provided by the franchisor. Each new franchisee is often required to take a training program on all aspects
of operating the franchise. This training could include classes in accounting, personnel management
marketing and production.
3. Capital requirements: Starting a new venture can be costly in terms of both time and money. The
franchise offers an opportunity to start a new venture with up-front support that could save the
entrepreneur's significant time and possibly capital.
4. Knowledge of the market: Any established franchise business offers the entrepreneur years of
experience offered to the franchisee that details the profile of the target customer and the strategies that
should be implemented once the operation has begun. This is particularly important because of regional
and local differences in markets.
5. Operating and structural controls: Two problems that many entrepreneurs have in starting a new
venture are maintaining quality control of products and services and establishing effective managerial
controls. And this can be overcome with the help of franchising.

Disadvantages: (Any two)

1. Right and the only way of doing things: Entering into a franchise contract limits the degree of freedom
for the franchise. As such, one gets an over-guided and over-influenced degree of control exerted by the
franchisor. This results in losing the freedom to innovate to some
extent.
2. Continuing cost implication: Over and above the original franchise fee and royalties, a percentage of
revenue gets shared perpetually with the franchisor. The franchisor may also charge additional amounts
towards sharing the cost for services provided such as advertising and training.
3. Risk of franchisor getting bought: The franchisee faces serious problems and difficulties when the
franchisor either fails or gets bought out by another company.
4. Inability to provide services: The disadvantages to the franchisee usually centre around the inability of
the franchisor to provide services advertising and location. When promises made in the franchise
agreement are not kept, the franchisee may be left without any support in important areas.

Q2. PATA Group as part of its Corporate Social Responsibility activity decided to invest in sports. They
established an ‘Archery Training Academy’ at Jharkhand for tribals where students from all parts of the
state could enroll. They also provided boarding and lodging facilities to the selected sports person free of
cost. Besides this, the company also decided to organize computer literacy program for these candidates.
(a) Identify the type of value added by PATA group
(b) Give any three values communicated by PATA group (4 Marks)

Ans a. Cause related value

b. Social responsibility; Awareness about computer literacy; Balanced regional development; (Any other
relevant value)
 CBSE 2016-17 Compartment Paper

Q1. ‘Shudh Mishthan Bhandar’ was a partnership firm owned by Ram and Madhur. ‘Bengali Rasgoola’ was
another partnership firm owned by Das and Sengupta. Ram and Madhur were sharing profits in the ratio of
3:2 and Das and Sengupta used to share profits in 1:4 ratio. Both the firms were situated in a famous
market of Kolkatta and were doing competitive business. Ram, the partner of Shudh Misthan Bhandar
observed that many of their customers were from far off areas and if branches of Shudh Misthan Bhandar
are also opened in other parts of the city the firm will be able to earn huge profits. Similar was the situation
of Bangali Rasgoola. Their customers were also from the different and far off places of the city. One day in a
function at a common friend’s house the partners of both the firms met. The partners of both the firms
knew that the internal expansion of their respective firms will be costly. Hence, they discussed about the
acquisition of one of the firms by another on friendly terms. For this purpose, they agreed to meet once
again to finalize the formalities. Finally, on 1-1-2016 ‘Shudh Mishthan Bhandar’ acquired the business of
‘Bengali Rasgoola’ on mutually agreed terms and conditions.
(a) Give the meaning of ‘Acquisition’ as a growth strategy.
(b) State any other two ways which can be used for acquisition. (3 Marks)
 CBSE 2016-17 Delhi Paper

Q1. What is meant by ‘Financial Synergy’? (1 Marks)

Ans This is the direct result of financial factors such as lower taxes, higher debt capacity or better use of
idle cash for which two or more firms merge together.

Q2. ‘Golden Sweets’ was a partnership firm, owned by Swati and Sushma. ‘Asam Sweets’ was another
partnership firm owned by Vipan and Pranav. Swati and Sushma were sharing profits in 1:2 ratio and Vipan
and Pranav were sharing profits in 2:3 ratio. Both the firms were situated in a famous market of Guwahati
and were doing competitive business. Pranav the partner of ‘Asam Sweets’ observed that many of their
customers were from far off areas and if branches of ‘Asam Sweets’ are opened in other parts of the city,
the firm may earn huge profits. Similar was the situation of ‘Golden Sweets’. One day in a function at a
common friend’s house, the partners of both the firms knew that the internal expansion of their respective
firms will be costly. Hence, they decided about the merger of the two firms. For this purpose, they decided
to meet again to finalise the conditions of merger. Finally, on 1.1.2016 their respective firms were merged
and a new firm ‘Asam Golden Sweets’ was formed with all the four partners Swati, Sushma, Vipan and
Pranav. Their new profit-sharing ratio was 1:2:2:3. During the year ended 31.12.2016 the new firm opened
four new branches in different parts of the city and earned a profit of 30% on sales.
(a) Identify the type of merger adopted by the two firms and also give its meaning.
(b) Also give the names and meaning of two other types of mergers. (3 Marks)

Ans (a) Horizontal merger- a merger occurring between two companies in the same industry
(b) Other type of mergers is:
Conglomerate – A merger between firms which are involved in totally unrelated business activities
Market Extension – A merger taking place between two companies that deal in the same products but in
separate markets
Product extension – A merger taking place between two business organization that deal in products that
are related to each other and operate in the same market
Vertical merger- A merger taking place between two companies producing different goods and services for
one specific finished product.
(Any two)

Q3. Raman started a gym named as ‘Strong Body’. He installed large number of machines and equipments
of different types and appointed qualified trainers to help the customers in the use of machines. Initially he
kept a low fee per hour so that boys and girls belonging to the poor families may also avail the facilities of
the gym. Very soon his gym became popular and he started operating in three shifts. For this is appointed
additional trainers. He also installed extra machines so that more customers could be enrolled. In one year
he started earning good profit. He took a nearby building on rent and started a ‘Recreation and Health
Club’ for the senior citizens of the locality on very nominal charges. He also encouraged young boys and
girls to participate in the cleanliness drive started by Prime Minister. They agreed and started giving one
hour daily for cleanliness of the nearby areas before opening of the ‘strong body’ gym and ‘recreation
club’.
(a)Identify and explain the type of business expansion that took place under the entrepreneurship of
Raman.
(b)Identify any two values that Raman tried to propagate. (4 Marks)

Ans (a) Internal Expansion- It results from the gradual increase in the activities of the concern.
(b) Values- Protecting the environment; Working for the benefit of the economically weaker section. (Any
other suitable value)
 CBSE 2016-17 All India Paper

Q1. Distinguish between internal expansion and external expansion. (2 Marks)

Ans Internal expansion results from the gradual increase in the activities of the concern. The net result of
internal expansion is the increase in business activities and broadening the present capital structure. The
concern may expand its present production capacity by adding more machines or by replacing old
machines with the new machines with higher productive capacity.
External expansion refers to business combination where two or more concerns combine and expand their
business activities. The combination may be among competing units or units engaged in different
processes. After combination, the constituted firm pursues some common objectives or goals. In the
process of combination, two or more units engage in similar business or related process or stages.
(Any two or any other relevant difference given by the student)

Q2. Alpha Ltd., a multinational restaurant chain company, gives an exclusive right to four Indian companies
to set up the restaurants in metropolitan cities in India in return for their payment of royalties and
conformance to standardized operating procedures. Indian companies decided to employ local workers
and to distribute left–over food amongst the needy as a provision in the agreement with Alpha Ltd.
(a) Identify and give the meaning of the concept discussed in the above para.
(b) List the main ingredients of the agreement that Alpha Ltd. Will enter into with the Indian companies.
(c) Also, identify any one value which the Indian companies want to communicate to the society through
the agreement. (3 Marks)

Ans (a) Franchising is as "an arrangement whereby the manufacturer or sole distributor of a trademarked
product or service gives exclusive rights of local distribution to independent retailers in return for their
payment of royalties and conformance to standardized operating procedures".
(b) Ingredients of franchise agreement
i. Contract Explanation
ii. Operations Manual
iii. Proprietary Statement
iv. Ongoing site maintenance
(c) Values:
Concern for poor (Any other related value)

Q3. Kamal started a gym named as ‘Strong Muscles Gym’. He installed large number of machines and
equipments of different types and appointed trained trainers to help the customers in the use of machines.
Initially he kept a low fee per hour so that the boys and girls belonging to poor families may also avail the
facilities of the gym. Very soon his gym became popular and he started operating in three shifts. For this,
he appointed additional trainers. He also installed extra machines so that more customers could be
enrolled. In two years, he started earning good profits. He took a nearby building on rent and started a
‘Recreation and Health Club’ for the senior citizens of the locality on very nominal charges. He also
encouraged young boys and girls to participate in the cleanliness drive started by Prime Minister. They
agreed and started giving one hour daily for the cleanliness of the nearby areas, before the opening of the
‘Strong Muscles Gym’ and the Recreation and Health Club’.
(a) Identify and explain the type of business expansion that took place under the entrepreneurship of
Kamal.
(b) Also, identify any two values that Kamal tried to propagate (4 Marks)

Ans (a) Internal Expansion- It results from the gradual increase in the activities of the concern.
(b) Values- Protecting the environment; Working for the benefit of the economically weaker section. (Any
other suitable value)
 CBSE 2016-17 Sample Paper

Q1. Explain the four types of acquisition. (4 Marks)

Ans There are four types of acquisitions:

1. Friendly acquisition Both the companies approve of the acquisition under friendly terms. There is no
forceful acquisition and the entire process is cordial.
2. Reverse acquisition A private company takes over a public company.
3. Back flip acquisition A very rare case of acquisition in which the purchasing company becomes a
subsidiary of the purchased company.
4. Hostile acquisition Here, as the name suggests, the entire process is done by force. The smaller
company is either driven to such a condition that it has no option but to say yes to the acquisition or the
bigger company just buys off all its share, thereby establishing majority and hence, initiating the
acquisition.

Q2. Slurrpy is a new mixed fruit juice introduced by Amit Beverages Ltd. The mixed fruit juice has been
fortified using various vitamins and minerals. The company designed a unique package for the product
which made it very attractive. Their sales figures were an indication of their success.
In order to capture huge market share, they decided to give exclusive rights to retailers to manufacture
and sell the product to the public.
Identify and explain this concept. State two factors which help start – ups and also state the advantages to
Amit Beverages Ltd. in doing so. (6 Marks)

Ans Manufacturing franchise opportunity: These types of franchises provide an organization with the right
to manufacture a product and sell it to the public, using the franchisor's name and trademark. This type of
franchise is found mostly in the food and beverage industry. Most bottlers of soft drinks receive a franchise
from a company and must use its ingredients to produce, bottle and distribute the soft drinks.

How do Franchising help Start-ups: (Any two)

1. Franchising helps in the working of start-ups because the product already carries a name in the market
which is otherwise the most difficult to establish. That is why start-ups pay royalty to the franchisor.
Franchising offers an established product that saves efforts, time and money involved and hence help start-
ups.
2. It is very important that the salesman must know his product. In this case start-ups are the, salesman.
Therefore, start-ups take up training to understand the product and franchisors make franchises fully
conversant with the product/services that they have to offer. Franchisors charge a fee for this purpose and
their motive at every step is ‘Pay and Smile.
3. Start-ups can grow rapidly without having to increase labour cost and other operating costs because
generally buyers walk up to them straight away.
4. In practice, Franchises work for the benefit of franchisors. In other words, they turn one plus one in to
eleven. They help each other. Franchisor’s efforts to boast his franchises are always sincere, so, there is no
clash of interest.

Advantages of franchising—to the franchisor

1. Quick expansion: A franchisor can expand a business nationally and even internationally by authorizing
and selling franchises in selected locations. The capital necessary for this expansion is much less than it
would be without franchising. Operating a franchised business requires fewer numbers of employees than
a non-franchised business. Headquarters and regional offices can be lightly staffed, primarily to support the
needs of the franchisees. This allows the franchisor to maintain low payroll and minimize personnel
problems.
2. Cost advantages: The franchisor can purchase supplies in large quantities thus, achieving economies of
scale that would not have been possible otherwise. Many franchise businesses produce parts, accessories,
packaging and raw materials in large quantities, and then sell these to the franchisees. One of the biggest
cost advantages of franchising a business is the ability to commit larger sums of money to advertising. This
pooling of resources allows the franchisor to conduct advertising in major media across a wide geographic
area.
 CBSE 2015-16 Delhi Paper

Q1. Toto-T mobiles is a famous brand of mobile phones. lts target customers are Students and
professionals who require specialized features in mobiles. This time the company developed a small sized
wireless mobile charger which is more convenient to use than the regular charger. This charger is made of
recycled material and consumes very less electricity.
(a) Quoting the lines from the above para identify and explain the two types of "added value" in the
business growth strategy.
(b) Also explain two more types of added value other than discussed in part (a). (6 Marks)

Ans (i) Quality added value — "small size wireless mobile charger"
Quality added value is basically adding convenience, ease of use or other desirable characteristics that
customers value. For example, turning a commodity into a branded product or design enhancements like
pull tabs for easy opening or sipper tops on beverage bottles.
(ii) Environmental added value — "consumes less electricity".
Environmental added value employs methods or systems that do not harm the environment or are less
harmful than those commonly used. For example, using less electricity, using less fuel and using recycled
material for packaging.

Two more types

(a) Cause-related added value is a social marketing strategy where business contributes part of the
revenue from a product or Service to
a cause. For example, a business may donate a percentage of revenue from each transaction to a cause
such as an educational facility for disadvantaged children or a wildlife sanctuary.
(a) Cultural added value is also a social marketing strategy that employs methods or systems of production
involving cultural aspects or allow for the needs and sensitivities of cultural groups. For example, producing
kosher food (in accord with Jewish law) or using a combination of English and the language.
 CBSE 2015-16 All India Paper

Q1. 'Sun-Cars Ltd' is a manufacturer of cars. It is famous for adding new and unique features in every new
model. This time the company launched a car 'Solaro” which does not require hydro—carbon fuel. It is run
by solar energy and takes less time in charging. Besides Saving fuel it Saves electricity also. Because of
these qualities the car was a big hit in the market.
(a) Quoting the lines from the above para identify and explain the two types of 'added value” in the
business-growth strategy.
(b) Also explain two more types of added value other than discussed in part (a) (6 Marks)

Ans a) (i) Quality added values - Solar car, No fuel, less charging time
(ii) Environmental added value = saves electricity

b) Two more types of added value

(i) Cultural -related added value
(ii) Cause related added value
 CBSE 2015-16 Sample Paper

Q1. Fizz & Lime is an established beverage company which started bottling Wheat Grass Juice; Bitter gourd
with Jamun and Amla with Aloe vera. It is planning to expand externally without compromising on the
unique taste of these drinks.
Belligio Juices got exclusive rights to manufacture and sell Wheat Grass and Amla Aloe under the name
Fizz& Lime. Belligio Juices had to use only the ingredients supplied by Fizz& Lime to produce, bottle and
distribute the two drinks.
a. Identify and explain the form of external expansion adopted by Fizz& Lime.
b. State any one feature of this form of expansion. (2 Marks)

Ans a. Manufacturing franchise opportunity- These types of franchises provide an organization with the
right to manufacture a product and sell it to the public, using the franchisor's name and trademark. This
type of franchise is found most often in the food and beverage industry.
b. Franchisee must use the ingredients given by the franchisor to produce, bottle and distribute the soft
drinks.

Q2. Diary foods ltd., has been well known for it’s products throughout India. They started manufacturing
Biscuits and chocolates in the year 1995 and slowly built their brand. The company occupied the top
position in terms of sales and it increased it’s product range also. By 2010 they were the undisputed leader
in the field of confectionaries. Their annual general meeting was held wherein the Board of directors felt
that the company should also be socially responsible in doing their business. They decided to use new
technologically advanced recycled paper for all their products which would retain the freshness of their
products as well as contribute towards the saving of our planet.
By doing this the company has modified their goods in a particular way to create a new product of greater
value to the customers. Identify the concept mentioned above and explain it from financial and marketing
point of view. (3 Marks)

Ans Value addition

Any Business can add values to goods and services by modifying them in a particular way to create a new
product of greater value to customers.
Added value, from a financial point of view, represents the difference between the value of goods and
services that are used as inputs to a production process and the value of the outputs of that process.
Added value, from a marketing perspective, means adding value that turns a commodity into a branded
product. Branded products and services can also have value addition by enhancing their design,
characteristics or range of features.

Q3. Unicon Ltd. and Nahata Communications provide Cable T.V network in adjacent areas of Delhi. After
sometime the market was slowly taken over by big cable companies. Both Unicon Ltd. And Nahata
communications understood the competition and decided to come together so as to increase their markets
share. This strategy helped them in cost saving through economies of scale as they could cover more areas
now. It led to the overall growth of both the companies.
a. Identify the enterprise growth strategy adopted by the two.
b. State the benefits that the companies have after this arrangement. (Any 5) (6 Marks)

Ans a. A market extension merger takes place between two companies that deal in the same products but
in separate markets. The main purpose of the market extension merger is to make sure that the merging
companies can get access to a bigger market and that ensures a bigger client base.
b. Benefits:
1.Synergy
Synergy is the most essential component of mergers. In mergers, synergy between the participating firms
determines the increase in value of the combined entity. In other words, it refers to the difference
between the value of the combined firm and the value of the sum of the participants.
Synergy accrues in the form of revenue enhancement and cost savings.
2. Acquiring new technology
To remain competitive, companies need to constantly upgrade their technology and business applications.
To upgrade technology, a company need not always acquire technology. By buying another company with
unique technology, the buying company can maintain or develop a competitive edge.
3. Improved profitability
Companies explore the possibilities of a merger when they anticipate that it will improve their profitability.
4. Acquiring a competency
Companies also opt for Merger and Acquisition to acquire a competency or capability that they do not
have and which the other firm does.
5. Entry into new markets
Mergers are often looked upon as a tool for hassle-free entry into new markets. Under normal conditions,
a company can enter a new market, but may have to face stiff competition from the existing companies
and may have to battle out for a share in the existing market.
6. Access to funds
Often a company finds it difficult to access funds from the capital market. This weakness deprives the
company of funds to pursue its growth objectives effectively. In such cases, a company may decide to
merge with another company that is viewed as fund-rich.
7. Tax benefits
Mergers are also adopted to reduce tax liabilities. By merging with a loss-making entity, a company with a
high tax liability can set off the accumulated losses of the target against its profits gaining tax benefits.
 CBSE 2014-15 All India Paper

Q1. Healthy juice India Ltd and ‘Asli Juice Ltd’ are engaged in the production of fruit juice. Both the
companies sell the juice in 1000ml tetra packs and are in direct competition. To avoid competition, the
management of both the companies decided to merge and form a new company ‘Asli Healthy Juice India
Ltd’. The new company decided to sell the fruit juice through the company owned outlets throughout the
country.
(a) Name and explain the Enterprise Growth Strategy
(b) Also identify the channel of distribution decided by ‘Asli Healthy juice India ltd’. (3 Marks)

Ans (a) Horizontal merger- It is a merger between companies in the same industry. It is a business
consolidation that occurs between firms which operate in the same space often as competitors offering the
same goods and services.
(b) Direct/zero level of distribution channel.
 CBSE 2014-15 Sample Paper

Q1. Hema Enterprises is dealing in Health Drinks. The enterprise has been manufacturing ‘Mother’s Choice’
a malt-based health drink. Adapting to the latest market trends she decided to bring out an improved form
of fortified health drink with vitamin B-12, iron and minerals to increase immunity. She believed that by
modifying the product she will be able to create a new product. Identify the concept and define it. (2
Marks)

Ans Value Addition; Businesses add value to goods and services by modifying them in a particular way to
create a new product of greater value to customers.

Q2. ‘Unique Motors Ltd.’ was a car dealer. It took over a car manufacturing plant ‘Speedcart & Co.’ and
started a new business in the name of ‘Uniquecart Ltd.’ to synergise and capture a major share of the
market. Like their competitors, they decided to sell their cars through company appointed dealers
(retailers) in various parts of the country. This would relieve the company from the burden of selling the
cars while at the same time giving them control over the distribution process.
(a) Name and explain the ‘Enterprise Growth Strategy’.
(b) Identify the channel of distribution used by ‘Uniquecart Ltd. (3 Marks)

Ans a. Merger- it is a combination of two companies into one larger company. The acquiring company
takes over the assets and liabilities of the merged company. All the combining companies are dissolved and
only the new entity continues to operate.
b. Indirect – One level- it involves one middleman called ‘retailer’.

Q3. Naresh had an ice cream factory and was selling them locally. He has been doing good business for the
past ten years. But with the entry of competitors, his business declined and he had to close down his
business. Since he was an enterprising person, he decided to take up exclusive distribution of a popular
international brand of ice-creams called ‘Icecone’. In return, he had to pay royalties to ‘Icecone’ and
conform to their standardised operating procedures. Instead of the plastic cups which cause
environmental hazards, ‘Icecone’ had biscuit cups and cones. To boost immediate sales, he decided to
make an offer of ‘Buy two cups/cones for the price of one’ for the first ten days.
(a) Identify and state the concepts of ‘Enterprise Marketing and Growth Strategies’ discussed in the above
para.
(b) Identify any one value which the business wants to communicate to the society. (4 Marks)

Ans a. Franchising- It is an arrangement whereby the manufacturer or sole distributor of a trademarked

product or service gives exclusive rights of local distribution to independent retailers in return for their
payment of royalties and conformance to standard operating procedures.
b. Environmental protection