business growth Flashcards
what are some objectives of growth
increase profits means profits can be reinvested back into business, stimulate more growth
increase market share, means business has more control, market power
take advantage of economies of scale, means cost of producing each time is reduced
inorganic growth
growth from buying other businesses e.g merger or takeover
mergers
where two businesses join together to form one business
may keep name of one of the original businesses or come up with new name
what is a takeover
one business takes over another business
what are the main motives for using mergers and takeovers
financial reward
business should be more profitable
could be tactical decision from business e.g gaining access to new technologies
what is horizontal integration
when one business combines with another business in the same industry and stage of production process as them
what is vertical integration
when one business combines with another business in the same industry but different stage of production process
what is organic growth
business grows from within
doesn’t involve any other businesses
business can come up with strategies to sell or make new products, expand into new markets, open up more stores etc
adv of organic growth
easy for business to manage and control how much business will grow
can maintain current management style, culture and ethics of business
less disruptive changes means workers productivity, efficency remain high
dis of organic growth
can take a long time
can take long time for business to adapt to big changes in market
may miss out on opportunities for ambitious growth if they grow organically
problems of growing a business
large businesses can suffer diseconomies of scale-where unit costs increase as the scale of production increases
happens as large firms harder to manage then small ones
can be hard to motivate people in a large firm, as they may not feel they belong or listened to, making them demotivated
in small firm there is closer contact between staff and managers
internal communication is harder
can be harder and slower to get info too right people with small chain of command
increase in demand means they need more raw materials and need to employ more people
reduces working capital available to pay bills
start up costs high and less likely to have many customers initially
why can quick inorganic growth be a risky strategy
business involved with mergers may find other business has different objectives and cultures
could lead to a clashes on important issues
may result in diseconomies of scale
staff will need to learn new procedures
may lead to bad customer service
therefore lack in sales
during takeover, buyer business will take on any liabilities of the other business-any payments business owed
why may a business decide to stay small and not grow
maintain the culture of a small business
business will be harder to manage if gets bigger
