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Flashcards in UB - Growth Deck (22)
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What is organic growth?

When a business grows from its own internally generate resources


Advantages of organic growth (3)

Less risky than taking over other businesses
Can be financed through internal funds
Builds on a business’ strengths


Disadvantages of organic growth (2)

Growth may be dependent on the market
Slower method of growth - shareholders prefer fast methods


What is horizontal integration?

When 2 businesses producing the same product or service combine together


Advantages of horizontal integration (4)

Can help the business dominate the market
Can help the business become stronger and more resistant to takeovers
Business can now take advantage of economies of scale
Higher prices can be charged if competition is reduced


Disadvantages of horizontal integration (3)

The business can become too big and too difficult to manage
Communication and coordination can become an issue
Some staff may become redundant


What is forward vertical integration?

When a business takes over a business it’s customer


Forward vertical integration advantages(3)

Business can control marketing, supply and distribution of their product
Already existing place for them to sell their product
Increased profits


Disadvantages of forwards vertical integration (1)

Increased costs of business is unable to manage the new business effectively


What is backwards vertical integration?

When a business takes over its supplier


Advantages of backwards vertical integration (3)

More control of quality, price and availability of raw materials
Guaranteed supply and prices of raw materials
Allows the business to control the supply chain


Disadvantages of backwards vertical integration (1)

Higher costs if the business is unable to effectively manage the new business


What is conglomerate integration (diversification)?

When a businesses operating in different markets merge together or one takes over the other


Advantages of conglomerate integration (3)

Reduces chance of business failure as product portfolio is increased
Makes a larger more financially secure business
Breaking into new markets is easier


Disadvantages of conglomerate integration (2)

Requires significant financial and Human Resources


What is a merger?

When two businesses join together to make one on equal terms


Advantages of a merger (4)

Reduces risk of business failure and increases market share
Makes the business larger and more financially secure
Decreases competition in the market
Merged companies can share business experiences and ideas


Disadvantages of a merger (4)

Requires a significant amount of financial and Human Resources
Risk that the main business will be harmed
Conflict between objectives can occur


What is a takeover

When one large firm takes over another smaller firm so the smaller one is lost completely


Advantages of a takeover (4)

Reduces risk of business failure
Makes business larger and more financially secure
Increased brand awareness as the business expands
Eliminates competition


Disadvantages of takeover (4)

Requires significant financial and Human Resources
Risk of harming the main business
Business can become harder to control
More decision making and more risks


What is a de-merger?

When a business splits into two separate organisations