methods of growth

Question 1

growing organically

Answer 1

growing from inside the firm

Question 2

growing inorganically

Answer 2

growing from outside the firm

Question 3

organic growth

Answer 3

is the expansion of a business by product development, advertising, increasing staffing

Question 4

advantages of organic growth

Answer 4

• no loss of control as the business is not integrating with others
• launching new products can target different markets
• exporting existing products abroad widens their marker
• hiring more staff will bring in new ideas
• selling online means the business can trade 24/7

Question 5

disadvantages of organic growth

Answer 5

• takes a long time to develop as the business may have to create new factories and distribution channels in the new markets that it has chosen to enter

Question 6

inorganic growth

Answer 6

growth through combining with a firm outside of the business. a merger or acquisition can be done horizontally or vertically

Question 7

horizontal integration

Answer 7

when two firms on the same stage of production join together

Question 8

advantages of horizontal integration

Answer 8

• common knowledge of the market so reduced risk of failure
• reduces number of competitors so market dominance and control over price
• quick and easy way to expand and increase market share
• achieve economies of scale which lowers average costs

Question 9

disadvantages of horizontal integration

Answer 9

• the firm is not spreading its risk so if the market suffers the whole business is at risk
• the consumer may lose out as number of competitors are falling and so prices rise
• variety of products in the market may fall which can attract the government

Question 10

vertical growth

Answer 10

when a firm acquires another firm on a different stage of production

Question 11

advantages of vertical growth - backward

Answer 11

• control the supply of raw materials
• removes the profit margin the supplier would demand
• standardise paperwork and procedures
• extend the scope of the firms activities which spreads risk

Question 12

advantages of vertical growth - forward

Answer 12

• secure the profit margin of their customers
• standardise paperwork so save on admin costs
• control the image and distribution outlets of the product
• eases planning as the firm knows its guaranteed outlets to sell its products

Question 13

disadvantages of vertical growth

Answer 13

• may be difficult to achieve economies of scale as the firm is moving into a different area of business
• more of a risk as firm may lack the skill to thrive in their new area of business

Question 14

conglomerate growth

Answer 14

this refers to the combining of firms which operate in completely different markets

Question 15

advantages of conglomerate growth

Answer 15

• a firm has a chance to spread its risk
• if one brand is successful then it is easy to launch another products
• attract a wide variety of customer segments
• staff may be attracted to working for your company as many job opportunities

Question 16

disadvantages of conglomerate growth

Answer 16

• the firms spreads itself too thin and fails to secure a market lead
• the firm is unable to bulk and can’t achieve economies of scale