1.6 Growth & evolution

Joint venture

________: two or more businesses agree to work closely together on a particular project and create a separate business division to do so.

Globalization

________: growing integration of countries through increased freedom of global movement of goods, capital and people.

Takeover

________: when a company buys over 50 % of the shares of another company and becomes the controlling owner often referred to as "acquisition.

Protectionism

________: using barriers to free trade, such as tariffs and quotas, to protect a country's own domestic industries.

Franchise

________: business that uses the name, logo and trading systems of an existing successful business.

Strategic alliances

________: agreements between firms in which each agrees to commit resources to achieve an agreed set of objectives.

Merger

________: agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning shares in the newly ________ business.

Economies of scale

reductions in a firms unit (average) costs of production that result from an increase in the scale of operations

Diseconomies of scale

factors that cause average costs of production to rise when the scale of operation is increased

Large-scale production

unit costs

Internal growth

expansion of a business by means of opening new branches, shops or factories (also known as organic growth)

External growth

business expansion achieved by means of merging with or taking over another business, from either the same or a different industry

Merger

agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning shares in the newly merged business

Takeover

when a company buys over 50% of the shares of another company and becomes the controlling owner often referred to as "acquisition"

Horizontal integration

integration with a firm in the same industry and at the same stage of production

Forward vertical integration

integration with a business in the same industry but a customer of the existing business

Backward vertical integration

integration with a business in the same industry but a supplier of the existing business

Conglomerate integration

merger with or takeover of a business in a different industry

Joint venture

two or more businesses agree to work closely together on a particular project and create a separate business division to do so

Strategic alliances

agreements between firms in which each agrees to commit resources to achieve an agreed set of objectives

Franchise

business that uses the name, logo and trading systems of an existing successful business

Globalization

growing integration of countries through increased freedom of global movement of goods, capital and people

Free trade

no restrictions or trade barriers exist that might prevent or limit trade between countries

Protectionism

using barriers to free trade, such as tariffs and quotas, to protect a country's own domestic industries

Multinational company/business

business organization that has its headquarters in one country, but with operating branches, factories and assembly plants in other countries

Scale of operation

Maximum output that can be achieved using the available inputs (resources) this scale can only be increased in the long term by employing more of all inputs

Economies of scale

Reductions in a firm's unit (average) costs of production that result from an increase in the scale of operations

Diseconomies of scale

Factors that cause average costs of production to rise when the scale of operation is increased

Internal growth

Expansion of a business by means of opening new branches, shops or factories (also known as organic growth)

External growth

Business expansion achieved by means of merging with or taking over another business, from either the same or a different industry

Merger

Agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning shares in the newly merged business

Takeover

When a company buys over 50% of the shares of another company and becomes the controlling owner often referred to as "acquisition"

Horizontal integration

Integration with a firm in the same industry and at the same stage of production

Forward vertical integration

Integration with a business in the same industry but a customer of the existing business

Backward vertical integration

Integration with a business in the same industry but a supplier of the existing business

Conglomerate integration

Merger with or takeover of a business in a different industry

Joint venture

Two or more businesses agree to work closely together on a particular project and create a separate business division to do so

Strategic alliances

Agreements between firms in which each agrees to commit resources to achieve an agreed set of objectives

Franchise

Business that uses the name, logo and trading systems of an existing successful business

Globalization

Growing integration of countries through increased freedom of global movement of goods, capital and people

Free trade

No restrictions or trade barriers exist that might prevent or limit trade between countries

Protectionism

Using barriers to free trade, such as tariffs and quotas, to protect a country's own domestic industries

Multinational company/business

Business organization that has its headquarters in one country, but with operating branches, factories and assembly plants in other countries

Closer to main markets; lower costs of production; avoid import restrictions; access to local natural resources

Why become a multinational?