UB - Growth Flashcards
(22 cards)
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
