1.6 Business Growth

Question 1

Three methods of growing a business organically

Answer 1

• Developing new products
• Increasing output
• Gaining new customers

Question 2

How to increase output?

Answer 2

• using resources more efficiently
  -increasing the capacity (e.g. building a new factory)

Question 3

How to gain new customers?

Answer 3

• reducing prices
  -better marketing
• opening new shops

Question 4

How to develop new products?

Answer 4

• researching and developing ideas
• copying ideas from others
• buying ideas from others

Question 5

Name four methods of external growth

Answer 5

• horizontal takeover
• backwards vertical takeover
• forwards vertical takeover
• diversification

Question 6

Explain horizontal takeover

Answer 6

A merger or takeover where the two businesses are in similar operation and stages of production.
E.g. Aldi taking over Lidl

Question 7

Explain what a backwards vertical takeover is

Answer 7

When a business merges with, or takes over, a business that supplies it with goods and services that is earlier in the supply chain.
E.g. Tesco taking over a farm

Question 8

What is a forwards vertical takeover?

Answer 8

When a business merges with, or takes over, a business that it supplies goods or services to, that is higher in the supply chain.
E.g. a farm taking over Tesco

Question 9

What is diversification?

Answer 9

When a business merges with or takes over another business that it has no connection to.
E.g. Virgin media taking over a festival