types of growth

Inorganic growth

External to the business

Achieved by joining with or taking over another business

Merger

When two businesses join together to from one business

They may keep original name of one business or make an entirely new one

Beinfits of mergers

Econmies of scale-

• a larger firm can reduce average costs- share marketing , bulk buying

• Lead to lower costs per unit and higher profit margins

Increase market share

• combining firms means more customers and sales

• Greater control over policing stronger brand dominance

Access to new skills and technology

• different expertise, technology, or staff

• Improve efficeny and innovation, better products- long term growth

Limitations of merger

Culture clash

• different management styles and workplace cultures

• Conflict between employees, lower motivation and productivity- reduces overall efficeny

High costs

• legal fees, restructuring

• Large amounts of finance, increase debt, reduces short term profitability

Integration problems

• systems, processes and staff need combining

• Disruption in operations

• Loss of key staff

• Reduces expected benefits of the merger

Takeover

When one business buys another gaining full control

Either friendly or hostile

Benefits of a takeover

Rapid growth

• business expands instantly by quoting another firm

• Increases firm and output quickly, gained immediate access to new markets

Increased market share

• buying a competitor increases control of market

Econmies of scale

Access to assets and technology

Limitations of takeover

Very expensive

• buying another company reuqired large financial investment

• May need loans-increases debt

• Intrests payments reduce profit

Culture clash

Employees from the quoted firm may resit new management

• conflict, low morale

Integration problems

Diseconomies of scale

• become to large to manage efficiently

• Communication breaks down

• Slower descion making

• Increased cost per unit

Organic growth

Achieved from within the business using its own rescources

Advantages of organic growth

• can maintain current management styles culture and ethics a of business

• Less risk as its expanding heat business is good at and its usually financed using profits

• Easy to manage and control

• Less disruptive changes means workers efficeny , productivity and morale remains high

Disadvantages of organic growth

Take along time to grow and adapt to changes to market

Market size isn’t affected so restricted to growing its market share and power

Might miss out on ambiguous growth if only grow organically