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Flashcards in 3.2 Business growth Deck (18)
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1

what is organic growth?

- internal, through expanding
- e.g. market penetration, product development, market development

2

what is inorganic growth?

- external, sudden and can bring significant change
- e.g. merges, takeovers, joint ventures

3

what are objectives of growth?

- synergies(bring businesses together)
- Economies of scope(wide variety of products in different markets)
- the experience curve
- economies of scale

4

what is diseconomies of scale?

- unit costs rise as a business expands

5

what problems might a business face with growth?

- communication problems
- control: slows decision making
- flexibility: to adapt to change
- motivation

6

what is overtrading?

- when a business grows to fast and overstretch their financial resources, such as cash

7

what is a merger?

- two businesses come together in a joint venture for mutual benefit

8

what is a takeover?

- may be hostile or voluntary, one business will acquire another along with its assets

9

what are the types of growth?

- backwards vertical
- horizontal
- conglomerate
- forwards vertical

10

what is backwards vertical growth?

- taking over a customer such as a retailer

11

what is backwards vertical growth?

- taking over a supplier

12

what is horizontal growth?

- merging with a business at the same level of the supply chain

13

what is conglomerate growth?

- taking over an unused business in a different market

14

what are rewards for inorganic growth?

- speedy growth
- higher remuneration for senior staff
- rewards for previous owner
- greater profitability if successful

15

risks of inorganic growth?

- regulatory intervention
- resistance
- financial strain

16

advantages of organic growth?

- less risk
- controlled pace
- cheaper than external growth
- diseconomies of scale minimised

17

disadvantages of organic growth?

- slow pace
- external expertise
- competition

18

reasons for staying small?

- costs
- flexibility
- control and efficiency
- owner preference
- convienience as a USP