methods of growth Flashcards
8 different types of methods of growth:
takeover, merge, backward vertical, forward vertical integration, horizontal integration, lateral integration, conglomerate integration, organic growth
describe what a takeover is?
involves one business, usually a larger business buying another smaller business.
describe what a merge is?
it involves 2 businesses agreeing to join forces and becoming one organisation.
describe what backward vertical is?
when a business takes over or merges with a business in an earlier sector of industry.
describe what forward vertical integration is?
when a business take over or merges with business in a later sector of industry.
describe what horizontal integration is?
involves firms at the same stage of the production process coming together.
describe what lateral integration is?
when companies involved use similar production techniques but are not in direct competition.
describe what conglomerate integration is?
occurs when businesses in different market join together.
describe what organic growth is?
it is when businesses decide to grow on their own without getting involved with other firms, which leads to a bigger market share.
an advantage and disadvantage of takeover:
advantage is competition is reduced which will increase sales.
disadvantage is it can be expensive to acquire another business.
advantage and disadvantage of a merge:
advantage is market share and resources are shared which can spread the risk of failure and increase sales.
disadvantage is it could be bad for customers as less competition will mean higher prices.
advantage and disadvantage of backward vertical:
advantage is no need to pau a supplier it marked-up prices so inventory is cheaper.
disadvantage is focusing on new activities can adversely affect core activities.
advantage and disadvantage of forward vertical
advantage is it can increase profits by cutting out the middleman and adding value itself.
disadvantage is the company may be incapable of managing new activities meaning higher costs
advantage and disadvantage of horizontal integration
advantage is the newer larger business can raise prices, increasing profits
disadvantage is quality may suffer due to the lack of competition.
advantage and disadvantage of lateral integration
advantage is the business can target new markets and therefore increases sales.
disadvantage is can have a lack of knowledge which can affect the performance of the products
