Theme 3.1 - Business growth

Question 1

3.1.2 - What is organic growth and its advantages and disadvantages?

Answer 1

OG - is where the firm grows by increasing their output eg more labour
Two types - internal and integration
Adv - able to keep control
Dis - expensive, time consuming, high risk

Question 2

3.1.2 - What is integration?

Answer 2

Growth through merger or takeover.
Merger - two or more firms join under common ownership
Takeover - one firm buys another

Question 3

3.1.2 - What is vertical integration and its advs and disadvs?

Answer 3

VI - integration of firms in the same industry but at different stages in the production process
Advs - increased potential for profit, less risk, control of quality of supplies, cost low, forward secures retail outlets
Dis - no expertise in the industry may be evident

Question 4

3.1.2 - What is backward vertical and forward vertical integration?

Answer 4

BI - when a merger takes the firm back towards the supplier of the good
FV - when a merger takes the firm towards the eventual consumer of the good

Question 5

3.1.2 - What is horizontal integration and its advs and disadvs?

Answer 5

HI - where firms in the same industry at the same stage of production integrate
Advs - reduces competition, increases market share, able to specialise and rationalise, able to grow there already expertise
Dis - increased risk for business if market fails

Question 6

3.1.2 - What is a conglomerate integration and its advs and disadvs?

Answer 6

CI - where firms in different industries with no obvious connection integrate. can sometimes be linked by common raw materials/tech/outlets
advs - useful for firms with no room to grow, reduces risk is market fails, easier for individual parts of business to expand
dis - damaging for business if no expertise in market

Question 7

3.1.2 - What are the constraints of business growth?

Answer 7

• size of market
• access to finance
• owner objectives
• regulation