UB Flashcards
(23 cards)
Types of external growth
Merger
Takeover
Acquisition
Diversification
What is a merger
When a firm combines with another to create one big business. A form of integration on equal terms
What is a takeover
When one firm takes over another. One business will lose its identity. Can be friendly or hostile
Advantages of merger and takeover
Business grows
Has more power
Survival rate grows
Larger returns
Increase market share
Spreads the risk
What’s an acquisition
A company buys most of all of a target company’s shares to assume control.
Diversification
When a business sells completely different products to completely different markets. Can develop new products to sell. Can be done by merging
Horizontal integration
Each business produces the same product and is at the same stage of production
Vertical integration
Integration of 2 or more business at different stages of production
Forward - takes over a customer
Backward - takes over a supplier
Why firms join together
Reduce risk of failure
Become market leader
Remove competitor
Disadvantages of firms merging
Have to share profits
Lose control
Let employees go
Employees interest and influence
Interest - good salary, job satisfaction, good working conditions, job security
Influence - change standard of work, industrial action,
Managers interest and influence
Interest - good salary, bonuses, job satisfaction, responsibility and status
Influence - make decisions
Share holders interest and influence
Want profit
Healthy dividends
Improved share value
Decision making
Vote for directions
Choose to sell shares
Suppliers interest and influence
Ensure repeat custom
Prompt payment
Change prices
Offer discounts
Change lead time
Strategic decision making
Set out company objectives
Made Long term basis
Made by top managers
Lack specific details
Tactical decisions
Made monthly/yearly
Middle managers
Achieve main objectives
Very specific
Operational decisions
Made daily/weekly
Made by all
Reactive when change occurs
Span of control
The number of people any manager/ supervisor has working for them
Types of structure
Hierarchical (tall)
Flat
Matrix
Entrepreneurial
Centralised
Decentralised
Tall structure
Many layers of management
Long chain of command
Info passed can take long time
Narrow span of control
Higher up = greater responsibility
Tall structure advantages and disadvantages
Definite hierarchy
Easy to spot communication break downs
Clear promotional ladder
Staff closely supervised
Not democratic
Slow response to change
Doesn’t motivate lower staff
Communication takes time
Flat structure advantages and disadvantages
Faster communication
Greater responsibility
Delegation of tasks
Fewer supervisors
React quickly to change
Less control of staff
Independent working not suitable to all
May abuse freedom
Centralised structure advantages and disadvantages
Tight control of decisions
decisions made by experts
Working to same orders
Common format
Allows bulk buying
Benefits from strong leadership
Procedures can be standardised
Lack of motivation from managers
Decisions take long time
Slow to react to change
