Learn: Business Growth and Operations

Merger

When two or more businesses voluntarily agree to combine and form a new organization.

Acquisition

When one business purchases a controlling interest in another company, with the target company's board agreeing to the purchase.

Hostile takeover

When a business gains control of another company without the agreement of its board of directors.

Joint venture (JV)

When two or more businesses cooperate on a project by establishing a separate legal entity, sharing costs, risks and rewards.

Strategic alliance (SA)

An agreement between two or more independent businesses to cooperate for mutual benefit without forming a new legal entity.

Franchising

An arrangement in which a business allows another operator to use its brand and business model in exchange for fees or royalties.

Horizontal integration

Combining with a business operating at the same stage of production.

Vertical integration

Combining with a business operating at a different stage of production.

Internal growth (organic growth)

Expansion using a business's own operations and capabilities rather than combining with another organization.

External growth (inorganic growth)

Expansion through arrangements with other organizations.

Economies of scale

Cost advantages that result in a decrease in average production costs as a business increases its scale of operations.

Diseconomies of scale

Cost disadvantages that result in a increase in average production costs as a business increases its scale of operations.

Internal economies of scale

Reductions in average costs arising from the growth and operations of an individual firm.

External economies of scale

Reductions in average costs arising from developments outside an individual firm, often within its industry or region.

Internal diseconomies of scale

Increases in average costs arising from inefficiencies within a growing organization.

External diseconomies of scale

Increases in average costs arising from external factors, such as congestion or rising local rents.